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United States Court of Appeals for the Ninth Circuit - 544 F.2d 1045
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A company bought a motel and property, then leased it back to the seller while claiming deductions for losses. The IRS said the transaction was not a true sale and disallowed the deductions.
Issue
The issue is whether the limited partnership can claim deductions for losses from a sale-leaseback transaction that may not have been a true sale.
Conclusion
The legal conclusion of the court is that the transaction between Twenty-Fourth Property Associates and the Romneys was not a sale but an option to acquire the property. Therefore, the depreciation and interest deductions claimed by Associates were properly disallowed for tax purposes.
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Rule
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Analysis
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Facts
- The case involves a limited partnership, Twenty-Fourth Property Associates, claiming deductions for losses related to the purchase of a motel and related property.
- The Tax Court disallowed the deductions on the grounds that the acquisition was either a sham or the purchase of an option to acquire the property.
- The purchase obligation of Twenty-Fourth Property Associates to the Romneys was nonrecourse, and the sales agreement was recorded in the local county, with a warranty deed and a quitclaim deed placed in an escrow account.
- The Tax Court held that the transaction was more like an option than a sale, as Associates had the power to walk away from the transaction at the end of ten years and only lose the $75,000 prepaid interest payment.
- The court held that a sale-leaseback transaction can result in a genuine indebtedness under section 167(a) of the Internal Revenue Code of 1954, but if the purchase price exceeds the fair market value, there is no meshing between the purchase price and the equity in the property, and the transaction cannot be treated as a sale.
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Holding
- Hey! This is the holding for Pennoyer v. Neff. It probably isn't the holding for the brief you're looking at. Join LSD+ for full access.
- A named property within the court's jurisdiction is attached to satisfy an unrelated claim, despite the owner of said property being a non-resident of the state.
- A named property within the court's jurisdiction is attached as the basis for the suit (e.g., to quiet title), despite the owner of said property being a non-resident of the state.
- An individual is sued who is a resident of the state, or who has been served with process while physically located within the state.
- jurisdiction - Neff is neither a resident, nor was served while within the state. Service by publication may be valid for an
- proceeding, where the owner would be made aware of the suit due to their property being seized, but not for
- jurisdiction - the action was on the basis of a suit to receive payment owed, and did not relate directly to a property within the state.
- jurisdiction, as the Oregon property was not attached to the initial suit, but rather was added in after the suit happened - note that Neff did not even purchase the property until after the suit had concluded.
- Accordingly, the Oregon court did not have jurisdiction over the initial suit between Neff and his lawyer.
- Enforcement of a judgment without jurisdiction denies due process!
- Additionally, although judgments rendered by other states are entitled to full faith and credit, if that state did not have jurisdiction to render the judgment, it loses such entitlement.
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Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Excepteur sint occaecat cupidatat non proident, . Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua
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