Rice's Toyota World, Inc. (Formerly Rice Auto Sales, Inc.) v. Commissioner of Internal Revenue

JAMES DICKSON PHILLIPS, Circuit Judge:

Rice’s Toyota World (Rice) appeals the Tax Court’s decision upholding the Commissioner’s disallowance of interest and depreciation deductions that Rice took on income tax returns filed for 1976, 1977 and 1978 on the basis that underlying sale and leaseback transactions were, for tax purposes, a sham. We affirm disallowance of the depreciation deductions and a portion of the interest deductions; but we reverse disallowance of a portion of the interest deductions.

I

In form the transactions in issue involved the sale and leaseback of a used computer and…