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Court rejects the basis issue raised by respondent and holds that
the Kanters realized short-term capital gains of $476 and $11,250
from Kanter's respective sales of Brajdas shares and Electronic
Missile shares.
With respect to the Rooney Pace bond sale to Mallin and the
two notes sold to MAF (the Victorian Village and Sam Block
notes), we are not satisfied that these were bona fide sales. In
our view, MAF was not acting at arm's length with Kanter in these
two note transactions. We have similar doubts with respect to
the arm's-length nature of the Rooney Pace bond sold to Mallin
because Kanter originally acquired the bond for $5,000 on May 29,
1987, but later "sold" the bond to Mallin for $10 on December 29,
1987.
More importantly, the totality of the evidence, including
Kanter's admission that he reported the transactions as sales
solely for the purposes of avoiding the audit process and the
generally more onerous task of establishing worthlessness
satisfies the Court that the transactions were not bona fide
sales and were not at arm’s length.53 Among other things, the
Court doubts that MAF and other accommodating parties ultimately
53
Besides the transactions at issue here, IRA also "sold" to
MAF the promissory notes of Ballard and Lisle's respective
grantor trusts, which trusts had invested in movie shelters. As
of the time these trust note transactions took place, the trusts'
movie investments had proved to be unsuccessful, so that for all
practical purposes the trusts held no assets.
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