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In addition to the HELO note acquired from Int'l Films, IRA
had another $485,825 receivable owed by HELO.41 This second note
was also sold to MAF along with a $345,869 note receivable from
Cedilla Investment Co., one of IRA's subsidiaries, for $1 each,
resulting in an additional $831,692 loss. As of August 31, 1987,
Holding Co. had total assets of $11,552,887. Holding Co. had the
resources to pay either IRA or Int'l Films when the receivable
was written off.
In addition to the receivables MAF purchased from IRA, MAF
purchased from Kanter for $27,949, a $311,878 promissory note
owing by Victorian Village and a $23,356 promissory note from S.
Block for $1. Kanter sold these promissory notes to MAF to
create a $307,284 loss for tax purposes. By selling the notes,
Kanter claimed the loss as having been realized by way of a sale
or exchange rather than as bad debt losses.
MAF neither inquired into nor independently ascertained the
value of the purchased promissory notes. MAF did not examine and
consider a particular note's collectibility or the
creditworthiness of its maker or obligors. MAF later wrote off
the notes as uncollectible.
By the end of 1987, neither Ballard nor Lisle owed any
portion of their original "loans" totaling $196,648 and $28,284,
41
By Sept. 1, 1985, HELO was no longer a subsidiary of Holding
Co.
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