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1. The I.R.C. Section 351 Exchange and Related Transactions
In order to avoid the realization (or recapture) of gains
resulting from the sale of the real estate partnership interests,
Kanter utilized Cashmere Investment Associates, Inc. (Cashmere),
a shell corporation and, on or about May 15, 1983, directed the
trusts to transfer their partnership interests into Cashmere in a
section 351 nontaxable exchange for stock.
Cashmere was incorporated on February 2, 1982, in Delaware
but had never been activated until the aforesaid transaction.
Cashmere's board of directors consisted of Meyers and Weisgal.
Cashmere's president was Weisgal, its secretary was Sharon
Bayers, and its treasurer was Meyers.
The number of shares and classes of Cashmere's stock
received by the trusts in exchange for their partnership
interests were as follows:
Shares of Stock
Shareholder Common Stock Class A Preferred
BWK Revocable Trust 50 241.274
Everglades Trusts 1-5 400 257.226
BWK Family Trusts 30 --
Holding Co. 520 --
In order to offset the negative capital accounts of the
partnership interests and to avoid the realization of taxable
gains that would result from Cashmere assuming liabilities (the
negative capital accounts), Kanter caused the trusts to transfer
to Cashmere on May 15, 1983, eight notes receivable (assets) held
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