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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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