CMA Consolidated, Inc. & Subsidiaries, Inc. - Page 4

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          petitioner’s1 taxable years ended November 30, 1996 and 1997, as            
          follows:                                                                    
                                        Addition to Tax and Penalties                 
               TYE      Deficiency    Sec. 6651(a)(1)    Sec. 6662(a)                 
          11/30/96     $320,375         $16,019        $90,609                        
          11/30/97       1,729,294      --                  176,383                   
          All section references are to the Internal Revenue Code, as                 
          amended and in effect for the years in issue.  Rule references              
          are to the Tax Court Rules of Practice and Procedure.                       
               After concessions by the parties, the primary issues                   
          remaining for our consideration are:  (1) Whether petitioner is             
          entitled to approximately $2.7 million of deductions claimed for            
          its taxable years ended November 30, 1996 and 1997, from a lease            
          strip deal; (2) whether petitioner’s lease strip deal has                   
          economic substance and is to be respected for Federal income tax            
          purposes; (3) whether petitioner’s claimed rental expense                   
          deductions arising from the lease strip deal are deductible as              
          ordinary and necessary business expenses; (4) whether petitioner            
          is entitled to claim note disposition losses from the lease strip           
          deal; (5) whether the $2,259,900 that petitioner advanced to CMA            
          Capital Corp. is to be treated as an investment (equity) or debt;           
          (6) whether for its taxable year ended November 30, 1997,                   


               1Petitioners make up an affiliated group of corporations               
          that filed consolidated income tax returns for the years in                 
          issue.  CMA Consolidated, Inc. (CMA), is the common parent                  
          corporation of that group.  For convenience, we use “petitioner”            
          to refer to that affiliated group of corporations.                          




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