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purchaser makes a small cash payment and executes a nonrecourse
note for the remaining purchase price. Id. In this type of
situation, the transaction is so economically infeasible or
lacking in economic substance that the investor’s primary or sole
motivation for entering into the transaction is the tax benefits
(e.g., artificially inflated depreciation deductions and
investment tax credits). Id. The fair market value of the
underlying asset will not conceivably support the purchase price,
and the nonrecourse debt practically ensures that the price will
not be paid. Id. For these reasons, prior opinions of this
Court and of other courts have focused on fair market value of
the property and the character of financing for purposes of
evaluating profit objective. Id.; Rose v. Commissioner, 88 T.C.
386, 412-414 (1987), affd. 868 F.2d 851 (6th Cir. 1989).
Fair market value is the price that would be reached by a
willing buyer and willing seller where neither is under any
compulsion to buy or sell. Chiu v. Commissioner, 84 T.C. 722,
730 (1985); Gianaris v. Commissioner, supra. Previous sales of
the same property without subsequent events affecting value are
generally strong indicators of fair market value. Tripp v.
Commissioner, 337 F.2d 432, 434-435 (7th Cir. 1964), affg. T.C.
Memo. 1963-244; Chiu v. Commissioner, supra at 734-735; Estate of
Scull v. Commissioner, T.C. Memo. 1994-211; Brigham v.
Commissioner, T.C. Memo. 1992-413.
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