From our private database of 22,300+ case briefs...
Rice’s Toyota World, Inc. v. Commissioner
United States Court of Appeals for the Fourth Circuit
752 F.2d 89 (1985)
Rice’s Toyota World (Rice) (plaintiff) was a car-sales company. Rice contacted Finalco, a company that leased equipment, about Finalco’s purchase-and-leaseback arrangements. Finalco would sell equipment to a company and lease the equipment back from the purchaser, creating a large tax loss in the early years of the transaction on which the purchaser could claim depreciation deductions and interest-expense deductions. Rice purchased a used computer from Finalco for approximately $1.5 million, using a recourse note of $250,000 payable over three years and two recourse notes for the remaining amount payable over eight years. Rice leased the computer back over to Finalco, which subleased the computer to another company. After three years, Rice had paid off the $250,000 note and $30,000 in interest on the other notes. On its income-tax returns for those three years, Rice claimed depreciation deductions from its ownership of the computer and interest deductions for its payments on the remaining notes. The Commissioner of Internal Revenue (the Commissioner) (defendant) disallowed Rice’s interest and depreciation deductions, holding that the purchase-and-leaseback agreement was a sham transaction. Rice petitioned the United States Tax Court for a redetermination, and the tax court upheld the Commissioner’s disallowance. The tax court agreed that the purchase-and-leaseback arrangement was a sham transaction, noting that Rice did not have any business purpose for the arrangement other than receiving tax benefits and that there was no economic substance in the transaction because there was no possibility that it would lead to a profit. Rice appealed.
Rule of Law
Holding and Reasoning (Phillips, J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 518,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.Unlock this case briefRead our student testimonials
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.Learn about our approachRead more about Quimbee
Here's why 518,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 22,300 briefs, keyed to 984 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.