Back in 1981, IBM went on a spending spree. But it wasn’t buying plant and equipment or new offices. It was buying $200m of aircraft and airline equipment from loss-making Pacific Southwest Airlines; $42m to $45m of locomotives, freight cars and railway lines from CSX Corp; $68m of new chemical plant and equipment from tyres and chemicals manufacturer B F Goodrich Inc; between $100m and $200m for a load of new machines, equipment and tooling – ironically thought to include some Honeywell computers – from the Ford Motor Company. The reason for these bizarre purchases – actually they were sale and leaseback deals – was that in summer 1981, the US Congress passed legislation that allowed unprofitable companies – or even profitable ones like CSX and Goodrich were – that had tax credits but no, or too little, profit to set them against, to sell those credits to profitable companies with spare cash – and IBM was an enthusiastic user of the tax break. Under the deal with Ford, which in total involved about a billion dollars of assets, IBM paid the cash over upfront, and although Ford nominally made lease payments to IBM, in fact IBM issued it with notes of equivalent value so that no money subsequently changed hands. IBM was then able immediately to offset 10% of the value of the assets against its tax bill, and then depreciate the assets over the period of the lease, which in the Ford case was estimated to give the company a net gain on the deal of as much as $350m. The idea was to enable moribund companies to find desperately needed cash, but was soon recognised as nothing more than a government subsidy to chronic loss-makers and an undeserved tax break for wealthy companies one congressman compared it with the practice of the mediaeval Roman Catholic church, which raised money by selling indulgences – pardons for sins committed. So the boom came down in mid-1982, and six years later, there could be a price to pay.The Internal Revenue Service is investigating many of the deals done under the law, which is estimated to have cost Uncle Sam a cool $37,000m in taxes. The revenue men are suspicious that many of the deals may have been structured so as to appear as if they met the terms of the law without actually doing so, but it is not known whether any of the deals done by IBM – which were arranged for it by Salomon Brothers – is the subject of investigation.