Investment Research Associates - Page 209




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         distributions to IRA are attributable to services provided by                 
         Ballard, Lisle, and Kanter.  We further have found that the gain              
         on the sale of the Schnitzer-PMS stock was properly taxable to                
         Ballard, Lisle, and Kanter.  Additionally, the interest income                
         earned on the payments is also properly taxable to Ballard,                   
         Lisle, and Kanter.  Finally, we have found that the payments by               
         Frey to Zion, the payments by Schaffel to Holding Co, and the                 
         distributions from Essex to Holding Co. are attributable to                   
         services provided by Kanter.                                                  
              In addition, we have found that the corporations were shams,             
         and, even if the corporations had been viable entities,                       
         petitioners were the true earners of the income, and respondent's             
         allocation under section 482 was not unreasonable, arbitrary, or              
         capricious.                                                                   
              With respect to 70 percent of the payments from Hyatt to KWJ             
         Corp., all of the payments by Frey to Zeus, all of the payments               
         from Schaffel to IRA, the bargain element in the sale of the                  
         Schnitzer-PMS stock to IRA, as well as the gain and interest on               
         the repurchase of the stock, and all of the Essex distributions               
         to IRA, we think the 45-45-10 split is clearly evident.  Thus, we             
         hold that the payments, bargain element, gain, and interest are               
         taxable 45 percent to each of Ballard and Lisle and 10 percent to             
         Kanter.                                                                       








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