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On the basis of the foregoing, we hold that petitioner did
not have a pretax profit motive. We also hold that petitioner
had no valid nontax business purpose for entering into the second
lease strip deal. See Casebeer v. Commissioner, 909 F.2d at
1363-1364; Nicole Rose Corp. v. Commissioner, 117 T.C. at 336-
338; ACM Pship. v. Commissioner, T.C. Memo. 1997-115.
5. Whether Petitioner’s Lease Strip Deal Had Economic
Profit Potential Aside From the Tax Benefits
We now turn to the second prong of our inquiry involving an
objective inquiry into the economic effect of the series of
transactions and whether it appreciably affected petitioner’s
beneficial economic interest, aside from potential tax benefits.
See ACM Pship. v. Commissioner, 157 F.3d at 246-248; Casebeer v.
Commissioner, supra at 1363.
In this inquiry, we examine the potential for economic
profit from petitioner’s over lease residual interests in the
K-Mart and Shared equipment. As discussed above, there were no
over lease residual interests because the over lease agreement
expired on the same date as the master lease. Even assuming that
petitioner had acquired some over lease residual interests in
that equipment, those interests had no residual value and/or
little if any potential for rental income. A September 28, 1995,
forecast respecting the residual interests would have revealed
that, by the time the residual interest periods began, there
would have been: (1) No residual value for that equipment and/or
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