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Unless otherwise indicated, references hereinafter to
petitioners are to Ballard, Lisle, and Kanter, collectively.
I. Position of the Parties
Respondent contends that the payments made by the Five to
the various Kanter entities were kickbacks paid to petitioners
for their influence and assistance in acquiring business with
Prudential, Travelers, and others. Specifically, respondent
alleges that (1) when Ballard and Lisle were employed by
Prudential, petitioners received kickbacks from the Five that
petitioners agreed to split 45 percent each to Ballard and Lisle
and 10 percent to Kanter (the Prudential transactions), (2) when
Lisle worked for Travelers, Lisle and Kanter received kickbacks
that were split 90 percent to Lisle and 10 percent to Kanter (the
Travelers transactions), and (3) Kanter alone received kickbacks
for transactions that were not necessarily related to Prudential
and Travelers (the Kanter transactions).
Respondent contends that the payments constituted income to
petitioners that they failed to report on their Federal income
tax returns. It is asserted that the payments related to the
Prudential transactions are taxable 45 percent each to Ballard
and Lisle and 10 percent to Kanter, the payments related to the
Travelers transactions are taxable 90 percent to Lisle and 10
percent to Kanter, and the payments related to the Kanter
transactions are taxable 100 percent to Kanter. In the
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