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pertinent times, Neal Crispin (Crispin) owned 98 percent of CMA’s
outstanding stock and has been petitioner’s ultimate decision
maker.
Since its May 1992 incorporation, CMA Capital Management,
Inc. (CMACM), has been a wholly owned subsidiary of petitioner
and a member of petitioner’s consolidated group. Since its
August 1983 incorporation, Capital Management Associates (CM
Associates) has been a wholly owned subsidiary of petitioner and
a member of petitioner’s consolidated group.
I. The Two Lease Strip Deals
A. Background
Petitioner was generally involved in equipment leasing
transactions and the structuring of equipment financing. During
the early 1990s, petitioner began to arrange deals designed to
separate equipment rental income from the related rental
expenses. In those deals, which were called “lease strips”
and/or “rent strips”, the rental income was allocated to a
tax-indifferent or tax-neutral party in order to allow another
party to claim a greatly disproportionate share of the related
tax benefits. Generally, a “tax-indifferent” or “tax-neutral”
party is one that does not incur a Federal income tax liability
on its income because of its status or its circumstances.
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