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truck crash. Petitioner’s technical savvy served as a useful
marketing edge in soliciting new work.
Petitioner first began the leasing arrangement in 1992 by
assigning law firm equipment to himself and leasing it to the law
firm. He then purchased all future equipment personally and
leased it to the law firm. The equipment petitioner leased to
the law firm consisted of computers, video equipment, and office
furniture.5 The original cost of the equipment used in the years
at issue was $1,840,157. From 1992 through 1997, petitioner
received rental payments from the law firm totaling $1,040,000.
Petitioner intended to receive an amount in rent generally
commensurate with the yearly depreciation deduction. During the
years at issue, however, the law firm experienced a loss, and the
law firm made no rental payments. Nor did the firm pay
petitioner a salary in those years. The losses during those
years were attributable to a case that petitioner had expected to
close but that took until 2000 to close. Ultimately,
petitioner’s leasing activity did not prove profitable,
principally because of the losses during the years at issue, and
he later sold the equipment to the law firm at book value for
$557,885. The law firm paid petitioner by increasing the amount
it owed him.
5The value of the office furniture was a small fraction of
the value of the assets he leased to the law firm.
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