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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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