- 16 -
them under their end-user leases on the equipment directly to
HCA. CFP allocated 99 percent of its income from the rent strip
sale with HCA to the Iowa Tribe.
The net effect of the series of November 1994 transactions
described above in steps 1 through 7 was for virtually all rental
income realized from the rent strip sale to HCA to be attributed
to a nontaxable entity (the Iowa Tribe), with the rental payments
due thereafter under the existing end-user leases on the
equipment to be paid to HCA.
8. About 2 days later, on December 2, 1994, CFP sold for
$450,000 to Asset Residco, Inc. (Residco), CFP’s interests as to
(1) the first 2 years of the master lease residual period with
respect to the K-Mart end-user lease equipment and (2) the first
6 months of the master lease residual period with respect to the
Amoco end-user lease satellite dish equipment. Residco, a
Delaware corporation, was wholly owned by Klein (vice president
of EQ and managing partner of Capital Asset Partners). CFP
allocated 99 percent of the income from its sale of these
residual interests to CFP’s 99-percent limited partner, the Iowa
Tribe. Residco paid the $450,000 sale price for these residual
interests by issuing its $450,000 secured promissory note due
January 1, 1995. Residco’s note was secured by the rental
payments Residco would be entitled to receive under its master
lease residual interests with respect to the K-Mart and Amoco
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011