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as to the pretax returns RD Leasing could expect to receive. Each
agreed that if the estimated residual values of the computers (as
determined by M&S, MAC, and ARI) were attainable, then the leases
were economically viable (i.e., had economic substance) without
regard to tax considerations. The two experts differed, however,
on the amount of pretax return attainable.
In reviewing the other’s report, Mr. Fleming and Dr.
Schallheim each had one “major” disagreement with respect to the
computation of yield, specifically, the computations of yield with
regard to the scenario where Comdisco does not exercise its early
termination option. In his rebuttal report, Dr. Schallheim stated
that Mr. Fleming included $2,711,993 as rents to be received by
Andantech, whereas Dr. Schallheim thought those rents had been sold
to NationsBank. (In addition, Dr. Schallheim found that Mr.
Fleming had understated the interest on the balloon notes in the
full term option by $268,541.)
Dr. Schallheim based his conclusion on his understanding of
the definition of the term “Sale Rents” in the lease receivable
purchase agreement. That provision, which defined the rents sold
to NationsBank, stated that “Sale Rents” would mean “all payments
of Rent payable under the Lease after the Closing Date but before
the Early-Termination Date as set forth on Schedule I.” (Schedule
I was captioned “Rents Sold to Purchaser” and provided specific
dollar amounts of the rents that were sold.) Dr. Schallheim
testified that he treated all rents payable before the early
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