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money debt. Waddell v. Commissioner, 86 T.C. 848, 901-903
(1986), affd. 841 F.2d 264 (9th Cir. 1988). We have held that
recourse notes were not to be treated as bona fide debt for tax
purposes where the possibility that the notes would be paid was
illusory and no actual intent existed to pay them. Ferrell v.
Commissioner, 90 T.C. 1154, 1186-1190 (1988); Durham Farms #1,
J.V. v. Commissioner, T.C. Memo. 2000-159, affd. 59 Fed. Appx.
952 (9th Cir. 2003).
The purported debt issued in connection with the first and
second lease strip deals is not valid indebtedness. With respect
to the $4,056,220 Jenrich equipment installment note and the
$10,000 and $1,000 Lexington notes issued to CMACM, there was no
bona fide intent to pay or to enforce those purported debt
obligations on the part of the issuers and holders of the notes.
Mallin (who advised Jenrich and was instrumental in bringing
about Jenrich’s involvement in the second lease strip deal
transactions) and Koehler (Lexington’s sole shareholder)
essentially viewed Jenrich’s and Lexington’s participation in
those second lease strip deal transactions as an accommodation to
petitioner and Crispin.
It is also highly questionable whether Jenrich and Lexington
possessed sufficient financial resources to meet their respective
“debt obligations”. In any event, the Jenrich “note payments”
equaled, coincided with, and were completely offset by the
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