- 14 - made to achieve grossly inflated tax benefits.11 If Sav-Fuel’s dominant or primary objective was to achieve a profit, it would not have purchased the EMS at such a grossly inflated price. The method of financing used in the EMS transactions also indicates that Sav-Fuel lacked the requisite profit objective. In purchasing the EMS, Nisona made a cash payment to Dard of only $337,000 and financed the remainder of the purchase price with a nonrecourse note. The cash payment neatly coincides with the full price paid to CEF, the unrelated party. Similarly, Sav-Fuel financed $9,004,500 of the purchase price with a nonrecourse note, which Nisona was to assign to Dard as collateral for its note. Both notes were not due for 25 years. The sole source of repayment of the nonrecourse note from Sav-Fuel to Nisona was revenues received by Sav-Fuel from CEF under the management agreement. These revenues were based on the gross energy savings realized from the use of the energy management equipment. However, it is unclear from the record whether the EMS was actually installed at Gould and whether there were any energy savings. The evidence in the record reflects that the grossly inflated purchase price and the nature of the nonrecourse 11Even if we were to accept petitioner’s unsupported valuation for the EMS of $5 million, this amount is still almost 1,500 percent greater than the price paid by Dard to CEF for the EMS (5,000,000 � 337,000 = 14.84, or 1,484 percent).Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
Last modified: May 25, 2011