Seymour Sacks Star Sacks v. Commissioner, Internal Revenue Service, Michael R. Geyser Joyce Geyser v. Commissioner, Internal Revenue Service

Mr. Sacks invested in solar energy devices. The Internal Revenue Service disallowed his depreciation deductions and investment tax credits on the ground that his sale and leaseback transactions were shams. The IRS prevailed in Tax Court, but we reverse.

I. FACTS

In the 1970’s, after the country suffered through the Arab oil embargo and a sharp increase in the price of oil, some people thought that the world would run out of oil, or at least that prices would continue to increase. An environmental theory developed, during the 1960’s and 1970’s, that “the unrestrained burning of cheap fossil fuels” might also damage the earth’s atmosphere. Albert Gore, Earth In the Balance 6 (1992). Many people also thought that the double digit inflation rates of the late 1970’s would continue indefinitely into the future. Others disagreed, arguing that the 1980’s price increases would induce investors to bring new supplies of fossil fuels onto the market and that, like most cartels, the oil cartel would collapse. People in high positions differed in their views. Many prominent politicians, journalists, and professors predicted permanent inflation and permanently rising energy prices.

Congress…