Vanderbilt Law Review

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This Note first discusses in detail the operation of a sale and leaseback transaction and delineates its various uses. The Note next points out the tax and financial advantages and disadvantages of the sale and leaseback, sets forth the possible avenues of attack on the transaction by the Internal Revenue Service (Service), and describes the consequences of a successful attack by the Service. The final section of the Note analyzes the judicial treatment of sale and leaseback transactions for tax purposes, focusing both on the traditional tests used by the courts and on changes in the law brought about by recent United States Circuit and Supreme Court cases. This section also identifies problems arising from application of the traditional tests and highlights the shortcomings of present judicial analysis. The Note concludes by proposing several analytical methods for determining the proper tax treatment of a sale and lease back and by suggesting solutions to the problems that arise from the present judicial analysis of these transactions.

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