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B. First Lease Strip Deal4
As to the first lease strip deal, the following complex
multiparty equipment purchase, lease, and related transactions
were entered into on November 1, 1994, November 30, 1994,
December 2, 1994, and January 3, 1995.
1. On November 1, 1994, CLI sold, subject to the existing
end-user leases, the equipment leased to K-Mart and Shared, along
with some equipment leased to others, to Equity Resource
Acquisition II (ERA), a limited partnership, for $13,919,451.
ERA was a special-purpose entity created and controlled by CLI
for the express purpose of accomplishing the purchase and sale of
the leased equipment. In exchange for the leased equipment
package, ERA assumed the debt incurred by CLI to finance the
equipment purchase. ERA also issued a $2,307,500 secured
recourse promissory note to CLI, payable within 60 days, with
accrued interest at 10 percent.
2. In turn, on November 1, 1994, ERA sold the leased
equipment for $15.05 million, subject to the existing end-user
leases, to Capital Finance Partners (CFP), a limited partnership.
The partners of CFP were: The Iowa Tribe--a 99-percent limited
partner; CMACM--a .05-percent managing general partner; Crispin--
4Although petitioner’s subject deductions were derived from
the second lease strip deal, we detail the first deal for
purposes of clarity and to provide a background for discussion of
the second deal.
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