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(recyclers) to Ethynol Cogeneration, Inc. (ECI), for $1,520,000
each. ECI paid for the recyclers with $481,000 cash and a 12-
year nonrecourse promissory note in the amount of $5,599,000,
which was secured by a lien on the four recyclers.
ECI simultaneously resold the four recyclers to F&G
Equipment Corp. (F&G) for $1,750,000 each. F&G paid for the
recyclers with $553,000 cash and a 12-year promissory note in the
amount of $6,447,000, 80 percent of which was nonrecourse. The
nonrecourse portion of the note was senior to the recourse
portion, and the note was secured by a second lien on the four
recyclers.
F&G simultaneously leased the four recyclers to Madison, and
Madison simultaneously entered into a joint venture agreement
with PI and Resin Recyclers, Inc. (RRI), to place the recyclers
with end users. Under the joint venture agreement, which was to
last 9-1/2 years, Madison received a fixed, monthly joint venture
fee equal to the monthly lease payment made to F&G. The fixed
monthly joint venture fee also equaled the payments both F&G and
ECI were obligated to make under their respective promissory
9(...continued)
substantially identical. We shall refer to both Sentinel EPS and
Sentinel EPE Recyclers as “recyclers”. See Cohen v.
Commissioner, T.C. Memo. 2003-303; Barlow v. Commissioner, T.C.
Memo. 2000-339, affd. 301 F.3d 714 (6th Cir. 2002); Davenport
Recycling Associates v. Commissioner, T.C. Memo. 1998-347, affd.
220 F.3d 1255 (11th Cir. 2000); see also Gottsegen v.
Commissioner, T.C. Memo. 1997-314 (involving both EPE and EPS
recyclers).
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