Hubert Enterprises, Incorporated, Successor By Merger To Hubert Holding Company - Page 4




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          of last resort under the applicable law.2  Unless otherwise                 
          noted, section references are to the applicable versions of the             
          Internal Revenue Code.                                                      
                                  FINDINGS OF FACT                                    
               LCL was formed as a Wyoming limited liability company on               
          April 30, 1998, and was treated as a partnership for Federal                
          income tax purposes.  LCL operated on the basis of a fiscal year            
          ended July 31, and it filed Forms 1065, U.S. Return of                      
          Partnership Income, to report its operations for Federal income             
          tax purposes.  During the relevant years, LCL engaged in                    
          equipment leasing activities and purchased equipment subject to a           
          lease.  LCL partially financed its purchases of that equipment              
          using promissory notes.  Some portions of the notes were                    
          recourse; the remaining portions were nonrecourse.                          
               LCL’s members were HBW and HCC.  HBW owned 99 of LCL’s 100             
          membership units, and HCC owned the remaining unit.  During the             
          subject years, HBW was a wholly owned subsidiary of HHC and a               
          member of its affiliated group.  HCC also was connected with that           
          group.                                                                      
          Relevant Equipment Leasing Activities                                       
               In 1998, LCL purchased some equipment from Capital Resources           
          Group, Inc. (CRG).  In connection with this purchase, LCL signed            


               2 We decide the relevant issue as to HBW.  As mentioned                
          above, HHC was the parent of HBW, and HBW was the relevant member           
          of LCL.                                                                     





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