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Petitioners would have us end our examination of the
transaction at this point and hold that the sale was a valid
arm's-length sale of the stock to IRA. The Court declines to do
so because it would ignore the true substance of the transaction
and give new meaning to the expression "blind justice". We think
the true substance of the transaction is clearly disclosed when
one follows the flow of the money.
The only activity conducted by KWJ Corp. and later the KWJ
Co. partnership, was receiving the Hyatt payments. IRA was to
pay $10,000 of the purchase price in November 1979 and the
balance by August 1980. Hyatt paid over $170,000 to KWJ Corp. in
1979. Thus, IRA simply paid the purchase price from the Hyatt
payments.
After paying 30 percent of each of the Hyatt payments to
Weaver, the remaining funds were (1) distributed as "consulting
fees" to Ballard's and Lisle's children, (2) filtered along with
other payments from the Five through IRA, Int'l Films, and HELO
as loans to Ballard, Lisle, and Kanter, and (3) distributed to
Carlco, TMT, and BWK, Inc. Lisle's control over the Carlco
assets, Ballard's control over the TMT assets, and Kanter's
control over the BWK, Inc. assets went unfettered. Petitioners
had unrestricted power to use the funds for their personal
benefit and in fact did so.
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