CMA Consolidated, Inc. & Subsidiaries, Inc. - Page 108

                                       - 74 -                                         
          a.  The Experts’ Opinions                                                   
               Respondent’s expert, Peter Daley (Daley), opined that, as of           
          September 28, 1995, the K-Mart and Shared end-user lease                    
          equipment would:  (1) Have almost no estimated residual value               
          when petitioner’s purported over lease residual interest periods            
          began; and (2) not generate rental income during the over lease             
          residual interest periods.  Obviously, if the over lease residual           
          interests had minimal or no value when acquired, petitioner would           
          not pass the second prong of the economic substance test.                   
               Petitioner’s expert, Robert S. Svoboda (Svoboda), opined               
          that the over lease residual interests had a fair market value of           
          $122,000 to $263,000 as of September 28, 1995.  Petitioner                  
          contends that it should succeed if it establishes that there was            
          a projected rental income above $215,00021 as of September 28,              
          1995.  In other words, petitioner argues that the economic                  
          substance test is met if it shows that as of September 28, 1995,            
          some potential existed for petitioner’s earning a pretax profit.            
          In that regard, petitioner also argues that its projected future            
          over lease residual interest rental income need not be discounted           
          to its present value as of September 28, 1995.                              




               21This amount would have been petitioner’s maximum out-of-             
          pocket cost if the note obligation had been fully paid.  We note,           
          however, that petitioner had paid only $40,000 of the $215,000 as           
          of the time under consideration.                                            





Page:  Previous  64  65  66  67  68  69  70  71  72  73  74  75  76  77  78  79  80  81  82  83  Next

Last modified: May 25, 2011