Investment Research Associates - Page 394




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          purchased the notes in question as a favor to Kanter.  Kanter                
          sold the notes to MAF to enable him to realize a loss for tax                
          purposes.  Kanter's testimony at trial as to the reason he "sold"            
          the notes (as well as the other securities at issue) is                      
          paraphrased in his brief, as follows:                                        
               Throughout trial, Kanter candidly admitted that the                     
               purpose of the asset sales was to "establish" a loss                    
               for tax purposes, because of the traditional practice                   
               of Respondent's agents to routinely propose to disallow                 
               Section 165 or Section 166 deductions claimed in IRA's                  
               or Kanter's tax returns.                                                
          Thus, by selling the various assets for a nominal amount, Kanter             
          was attempting to realize a loss by means of a sale or exchange              
          rather than as a bad debt or worthless security deduction.  MAF              
          neither inquired into nor independently ascertained the value of             
          the purchased promissory notes.  MAF did not look into or                    
          consider a particular note's collectibility or the                           
          creditworthiness of its maker or obligor.  Specifically, during              
          1987, MAF purchased the Victorian Village and S. Block notes from            
          Kanter for $27,949 and $1, respectively, as an accommodation to              
          Kanter.  After 1987 and up to the trial, Morrison continued as               
          president of MAF, although, since 1989, MAF has not been active              
          and has not conducted any business.                                          
               At all times relevant to this litigation, Windy City was a              
          corporation solely owned by the 25 Bea Ritch Trusts.  Joel                   
          Kanter, Kanter's son, was the president of Windy City.  Weisgal,             
          a longtime friend and business associate of Kanter, was the                  





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