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transferees and to lease the AVS unit II back from such trans-
feree(s). In this connection, the 1984 lease and sublease
allowed petitioner to sell, convey, assign, or otherwise transfer
to one or more transferees a percentage undivided interest in the
AVS unit II provided that, inter alia, any such transferee assume
a portion of petitioner’s obligation to pay the 1984 sublease
rent (i.e., to make payments when due of interest and principal
on the 1984 tax-exempt bonds) which was proportionate to the
percentage undivided interest in the AVS unit II that such
transferee acquired from petitioner. Pursuant to the 1984 lease
and sublease, if petitioner were to transfer in the aggregate 100
percent of its interest in the AVS unit II, petitioner was to be
released from its obligations under the 1984 lease and sublease
and the Basin Electric 1984 note.
Each of six unrelated entities (owner participants) wanted
to, and did, acquire from and lease back to petitioner a percent-
age undivided interest in the AVS unit II. Those entities
acquired in the aggregate 100 percent of petitioner’s interest in
that unit, and petitioner was released from its obligations under
the 1984 lease and sublease. In order to effect each acquisition
and leaseback, on December 3, 1985, each of the six unrelated
entities, inter alia, established a grantor trust (grantor
trust), which was materially identical to each of the other five
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Last modified: May 25, 2011