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funds allegedly diverted to Delta and Alpha were not income of
Kanter's law firm partnership. As a result, we further conclude
that we have subject matter jurisdiction over the CMS Investors
income adjustments at issue here because the adjustments are not
partnership items of a TEFRA partnership. We therefore reject
Kanter's contention that the Court lacks subject matter
jurisdiction over this issue.
The Court finds that it is not necessary to address Kanter's
claim that respondent is collaterally estopped as to this issue
by virtue of Durkin v. Commissioner, 87 T.C. 1329 (1986).
II. Whether the CMS Income Constitutes Kanter's Income
The Shelburne and Century movie partnerships made "bonus
payments" to Delta and Alpha pursuant to interim loans that had
been made by Delta to Shelburne and by Alpha to Century.
Respondent does not dispute that, under these loan arrangements,
Delta and Alpha lent millions of dollars that this Court, in
Durkin, stated were debts recognizable for tax purposes. Rather,
respondent contends that the portion of these "bonus payments"
otherwise allocable to Holding Co. is taxable income to Kanter
because he and other members of his law firm were the true
investors and the true lenders. The Court rejects that argument.
Respondent goes well beyond the holding of Durkin v.
Commissioner, supra. Based on the Court's statement in Durkin
that the bonus payments were a "diversion" of funds for the
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