CMA Consolidated, Inc. & Subsidiaries, Inc. - Page 21

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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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