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By letter dated December 17, 1992, Kanter wrote Ballard
regarding an obligation purportedly due by Ballard to Int'l Films
in the amount of $196,684. In the letter, Kanter requested that
Ballard pay $120,000 in satisfaction of this prior obligation, to
"simply avoid any controversy with me or anyone else." The
$196,684 was the amount that had been written off by IRA as a bad
debt in 1987.
During the audit of Kanter's 1987 and 1988 returns, the IRS
requested information including data pertaining to transactions
with the Five. The documents produced by Kanter during the audit
were in many instances incomplete with many missing pages.
Moreover, no documents pertaining to the $1,345,641 that Kanter
received as a loan from Administration Co. were provided.
Kanter, Ballard, and Lisle did not produce the records sought by
the IRS in connection with the business entities relating to
them. Nor did the IRS receive records voluntarily from any of
the entities that had transactions with them. The records that
were produced generally were relevant only to Schedule A
substantiation items, such as records related to charitable
contributions.
As a result of petitioners' failure to produce documents
voluntarily, the complexity of the transactions involved, and the
number of entities involved, the IRS issued summonses in order to
obtain the necessary documents and information to conduct the
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