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interests was de minimis or nonexistent. We hold that, as of
September 28, 1995, petitioner’s residual lease interests had
minimal or no fair market value.
c. Petitioner’s Lease Strip Deal’s Economic Profit
Potential
As of September 28, 1995, the K-Mart and Shared equipment
would have had no estimated residual value, and the fair market
value of the residual lease interests was nominal or zero. In
addition, the second lease strip deal, aside from potential tax
benefits, lacked any demonstrable objective, practical, economic
profit potential. Accordingly, we hold that petitioner’s second
lease strip deal fails to meet the second prong of our inquiry
into its economic substance. See ACM Pship. v. Commissioner, 157
F.3d at 246-248; Casebeer v. Commissioner, 909 F.2d at 1363.
Because of our holding, it is unnecessary to address
petitioner’s argument that rental income should not be discounted
to present value in valuing the lease strip deal profit
potential. See ACM Pship. v. Commissioner, 157 F.3d at 259-260
(agreeing on this point with T.C. Memo. 1997-115). In addition,
there is no need to address respondent’s argument that modest or
inconsequential profits relative to petitioner’s claimed
substantial potential tax benefits are insufficient to imbue an
otherwise questionable second lease strip deal with economic
substance. See id. at 258; Sheldon v. Commissioner, 94 T.C. at
767-768.
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