Richard E. and Mary Ann Hurst - Page 15

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          noted that “The holding of such a security interest is common in            
          sales agreements, and * * * not inconsistent with the interest of           
          a creditor.”  Id. at 610; see also Hoffman v. Commissioner, 47              
          T.C. 218, 232 (1966), affd. 391 F.2d 930 (5th Cir. 1968).  Fur-             
          thermore, at trial, the Hursts offered credible evidence from               
          their professional advisers that these transactions, including              
          the grant of a security interest to Mr. Hurst, were consistent              
          with common practice for seller-financed deals.                             
               2.   The Lease                                                         
               HMI also leased its headquarters on Safety Drive from the              
          Hursts.  As with the notes, the lease called for a fixed rent in            
          no way conditioned upon the financial performance of HMI.  Attor-           
          ney Ron David, who was intimately familiar with the transaction,            
          testified convincingly that there was no relationship between the           
          obligations of the parties and the financial performance of HMI.            
          The transactional documents admitted into evidence do not indi-             
          cate otherwise.  There is simply no evidence that the payment               
          terms in the lease between the Hursts and HMI vary from those               
          that would be reasonable if negotiated between unrelated parties.           
          And the Hursts point out that the IRS itself has ruled that an              
          arm’s-length lease allowing a redeeming corporation to use pro-             
          perty owned by a former owner does not preclude characterization            
          as a redemption.  Rev. Rul. 77-467, 1977-2 C.B. 92.                         

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