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no greater than $10,616,524 and for the early termination dates was
no greater than $25,626,591.
The projected balance due on the balloon notes at the end of
the full term of the lease was $20,335,186, and at the early
termination date the projected balance was $25,582,611.
Consequently, RD Leasing had no realistic potential to recover its
investment or to earn a pretax profit.
In sum, we conclude that under the objective economic
substance test, the leveraged sale-leaseback transaction involved
herein had no reasonable opportunity for economic profit. We now
turn our attention to whether RD Leasing/Norwest was motivated by
any business purpose apart from obtaining tax benefits.
c. RD Leasing/Norwest Was Not Motivated by Any
Business Purpose Other Than Obtaining Tax Benefits
The proper inquiry for the business purpose test is “whether
the taxpayer was induced to commit capital for reasons only
relating to tax considerations or whether a non-tax motive, or
legitimate profit motive, was involved.” Shriver v. Commissioner,
899 F.2d at 726. In other words, the business purpose test is a
subjective economic substance test. In making a “subjective
analysis of the taxpayer’s intent”, we review such factors as the
depth and accuracy of the taxpayer’s investigation into the
investment. Id. To the extent the taxpayer’s subjective intent is
material, we also consider factors that are arguably relevant to
the inquiry.
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