- 460 -
parted with and were actually out of pocket for the funds they
purportedly expended in these "transactions"; it is inferable
that the purported amounts, if paid for more than a nominal
amount, were returned to them in a circular fashion.54 In these
circumstances we conclude that Kanter failed to meet his burden
of proving that the Rooney Pace bond transaction with Mallin and
the two note transactions with MAF were bona fide transactions.
Consequently, we sustain respondent's determinations that the
Kanters are not entitled to loss deductions with respect to those
transactions in 1987. These transactions were not at arm’s
length and were not bona fide. See, e.g., Estate of Miller v.
Commissioner, T.C. Memo. 1968-230, affd. 421 F.2d 1405 (4th Cir.
1970).
On brief, Kanter argues that the Victorian Village note sale
to MAF stands on a different footing, because the note was "sold"
54
As stated in the Court's findings, the record does not
reflect who owned Computer Placement Services, the corporation
that owned 100 percent of MAF's stock. Although Kanter testified
that he had no interest in Computer Placement Services (see,
however, the discussion infra on petitioners' failure to
establish the inapplicability of sec. 267 to the Victorian
Village note transaction), he acknowledged performing some legal
work for Computer Placement Services. Moreover, Morrison stated
that MAF had no offices of its own, operated out of his
accounting firm's office, and that Freeman (IRA's president) had
asked Morrison to be MAF's president. Morrison further related
that he is a longtime friend of Kanter, and that he was paid no
compensation by MAF for being MAF's president.
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