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wraparound lease involving the same equipment. Originally,
petitioner planned to market the second lease strip deal to an
unrelated customer. Petitioner, however, decided to claim over
$4.2 million in deductions itself.
Petitioner contends that it was forced to become involved in
the second lease strip deal because of the IRS’s October 30,
1995, issuance of Notice 95-53, 1995-2 C.B. 334. The purpose of
that notice was to discourage such lease strip deals. In Notice
95-53, 1995-2 C.B. at 334-335, the IRS (1) described a lease
strip deal which, in all material respects, was substantially
similar to the first and second lease strip deals we consider
here, and (2) warned that the IRS would challenge and, on various
grounds, disallow the claimed tax benefits under such lease strip
deals. Notwithstanding the IRS’s warning in Notice 95-53, supra,
petitioner deducted more than $4.2 million for 1995, 1996, and
1997 from its involvement in the second lease strip deal.
In the first lease strip deal, involving CFX, the complex
multiparty equipment purchase, lease, and other transactions were
entered into on November 1 and 30, 1994, December 2, 1994, and
January 3, 1995. In petitioner’s second lease strip deal the
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