- 405 -
Taxable part of installment sale: "52,125"
Kanter's use of Cashmere and his manipulation and transfer
of promissory notes to Cashmere for the purpose of offsetting the
negative capital accounts of the trusts' partnership interests
served no bona fide business purpose. His attempt to structure a
nontaxable section 351 transaction was done only to avoid the
realization of taxable capital gains.
Similarly, the utilization of WACO as an intermediary in the
sale of the trusts' real estate partnership interests to Equity
Financial served no bona fide business purpose. It was done only
to avoid taxation.
Waco was a related party to both the BWK Revocable Trust and
Everglades Trusts 1-5.
OPINION
Although the parties disagree as to whether or not the
transfer of the promissory notes and the partnership interests by
Kanter’s grantor trusts to Cashmere constituted a valid transfer
under section 351, we find it unnecessary to decide the issue on
that basis. However, we reject Kanter’s contention that the
issue was not challenged by respondent under section 357(b). The
language in the notice of deficiency quoted above clearly shows
that respondent challenged the series of transactions under
section 357(b) even though section 357(b) is not cited.
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