Judge Posner adopted the model suggested by the taxpayers and chose as one of his inputs the undisputed rental payments Milbrew was charged by NVST.
075), a 100 percent increase and the purchase price agreed to by NVST and Northland.
72) This is precisely the test Judge Posner used in Milbrew to determine whether the sale of the plant from Northland to NVST was legitimate.
In Milbrew, Judge Posner asserted that the facts supported the finding that Milbrew and NVST were engaged in a bilateral monopoly.
In Milbrew, Judge Posner relied on the rent charged by NVST to Milbrew to predict the maximum price at which the dairy processing plant would sell.
By using a simple model, Judge Posner was able to show clearly and convincingly that a reasonable investor expecting a fifteen percent return on his investment would never have paid $3 million for the plant, as NVST did.
To avoid the rule of Estate of Franklin, and allow NVST to take depreciation deductions based on the $3 million purchase price, Ace made the note recourse against NVST and its partners.