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The first lease strip deal (for CFX) and the second lease
strip deal (for petitioner) involved equipment already subject to
the following leases: (1) A lease of photo processing equipment
to K-Mart (a large retailer), and (2) a lease of computer
equipment to Shared (a medical services provider). Late in 1994,
the K-Mart and Shared leases each had only a few years left to
run.
The transactions used to effect the first lease strip deal
included: (1) The purchase of computer, photo processing, and
satellite dish equipment already subject to existing end-user
leases with K-Mart, Shared, and others; (2) “taxable sale”-
leaseback transactions of that equipment by CFP, a partnership
and a tax-indifferent partner under the sale-leaseback
partnership, (a) where CFP was issued an equipment purchase
installment note with the installments equal to and offset by the
rental payments due under the wraparound lease entered into by
CFP, and (b) CFP’s leaseback of that equipment under a wraparound
lease encompassing those existing end-user leases; (3) a lease
strip sale by CFP whereby virtually all of the rental income with
respect to those existing end-user leases was stripped out and
allocated to the Iowa Tribe, a tax-indifferent party and 99-
percent limited partner of CFP; and (4) the transfer in a
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