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Mart equipment, and (2) from August 31, 1995, through February
28, 2002, in the case of the Shared equipment.
Petitioner did not offer a reasonable explanation as to why
it was necessary for CMACM (petitioner’s subsidiary and
affiliate) to acquire petitioner’s purported over lease residual
interests in the K-Mart and Shared equipment, and for CMACM,
pursuant to the purported section 351 transfer from CAP, to
acquire and/or assume (1) the rental payment obligation for the
entire life of the over lease and (2) the Jenrich equipment
purchase installment note. In that regard, there appears to have
been no concern on petitioner’s part in structuring this second
lease strip deal about Jenrich’s questionable financial condition
and ability to make payments on the installment note.
Ultimately, any note installments paid by Jenrich and over lease
rental payments by CMACM would be completely offset so that no
cash payments would have to be made by CMACM or by Jenrich.
In the first lease strip deal for CFX, petitioner had a
business purpose and profit motive; viz, obtaining a fee of more
than $611,000 for arranging the lease strip deal for CFX.
Petitioner, however, has not shown any credible business purpose
for its involvement in the second lease strip deal other than its
intent to claim $4.2 million in tax benefits. The second lease
strip deal was structured to strip out the equipment rental
income and reallocate it to the tax-indifferent Iowa Tribe in
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