- 75 -
at 1429-1430. If the steps have “reasoned economic justification
standing alone”, then the interdependence test is inappropriate.
Sec. Indus. Ins. Co. v. United States, supra at 1247. If, however,
the only reasonable conclusion from the evidence is that the steps
have “meaning only as part of the larger transaction”, then the
step transaction doctrine applies as a matter of law. Id. at 1246.
In order to maintain this objectivity and ensure the steps have
independent significance, it is useful to compare the transactions
in question with those usually expected to occur in otherwise bona
fide business settings. See Merryman v. Commissioner, 873 F.2d
879, 881 (5th Cir. 1989), affg. T.C. Memo. 1988-72.
Here, the sale-leaseback transaction between Comdisco and
Andantech-Foreign and the sale of the Comdisco rents by Andantech-
Foreign to NationsBank would not have taken place without the
planned participation of RD Leasing. This point is demonstrated
both by the importance of the preferred stock to Mr. Parmentier in
the negotiations and the certain financial failure of Andantech-
Foreign without a cash infusion from RD Leasing.
Petitioners assert that the financial projections using
forecasts of the residual values made by the appraisers in 1993
show that Andantech had a reasonable opportunity to earn a profit
from the transaction. All of the financial projections, however,
were made on the basis of the $15 million supplied by RD Leasing
and the avoidance of Federal income tax on the rents payable by
Comdisco.
Page: Previous 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 NextLast modified: May 25, 2011