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The exchange of Mr. Parmentier’s partnership interest for the
RD Leasing preferred stock is suspect. RD Leasing was a shell
corporation and was not involved in equipment leasing. It was
recapitalized for the purpose of engaging in this transaction. Mr.
Parmentier was not interested in any true investment in RD Leasing.
He wanted cash but agreed to take and hold the RD Leasing preferred
stock only in order to qualify the exchange under section 351.
RD Leasing was required to maintain sufficient funds to pay
the liquidation preference to Mr. Parmentier. We see no apparent
reasons for the use of an exchange of the preferred stock for Mr.
Parmentier’s interest in Andantech other than to facilitate the
tax-free transfer of the depreciation deductions to Norwest and to
compensate Mr. Parmentier for his services.
Standing alone, none of the individual steps in the
transaction at issue is the type of business activity one would
expect to see in a bona fide, arm’s-length business deal between
unrelated parties, and none of them makes any objective sense
standing alone without contemplation of the subsequent steps in the
transaction. Each step in the transaction leads inexorably to the
next. Consequently, the interdependence test is satisfied for
application of the step transaction doctrine.
We are of the opinion that NEFI and Comdisco recognized that
a direct transaction with RD Leasing would result in the offset of
depreciation deductions with the income from the rents.
Consequently, they passed ownership of the equipment through
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