- 94 -
Petitioners posit that, on a subjective basis, RD Leasing,
NEFI, and Norwest acted in a businesslike manner and were not
motivated solely by tax considerations. But we are not satisfied
that Norwest/RD Leasing (through its executive employees) believed
that the projected residual values were both realistic and
attainable.
In analyzing whether a taxpayer was induced to commit capital
for reasons relating only to tax considerations or whether a
legitimate profit motive was involved, the following factors are
particularly significant: (1) The presence or absence of arm’s-
length price negotiations, Helba v. Commissioner, 87 T.C. 983, 1004
(1986), affd. without published opinion 860 F.2d 1075 (3d Cir.
1988); see also Karme v. Commissioner, 73 T.C. 1163, 1186 (1980),
affd. 673 F.2d 1062 (9th Cir. 1982); (2) the relationship between
the selling price and the fair market value, Zirker v.
Commissioner, 87 T.C. 970, 976 (1986); Helba v. Commissioner, supra
at 1005-1007, 1009-1011; (3) the structure of the financing, Helba
v. Commissioner, supra at 1007-1011; (4) the degree of adherence to
contractual terms, id. at 1011; (5) the reasonableness of the
income and residual value projections, Rice’s Toyota World, Inc. v.
Commissioner, 81 T.C. at 204-207; and (6) the insertion of other
entities, Helba v. Commissioner, supra at 1011. Our application of
these factors to the transaction involved herein follows.
i. Presence or Absence of Arm’s-Length Price
Negotiations
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