- 537 -
In the notice of deficiency, respondent disallowed the loss
on the grounds that IRA did not establish a basis in the assets
sold or disposed of, that IRA failed to prove that the
transaction had economic substance, and that the sale was to one
or more related parties and was, therefore, subject to the
provisions of section 267 limiting the deduction of losses on
such transactions. The claimed loss arises out of a sale by
Decision Holdings Corp. (Decision Holdings), a subsidiary of
IRA.60
Decision Holdings was incorporated under the laws of the
State of Delaware on November 3, 1988. It initially was named
Tokyo Stress Management Co., which was changed to Decision
Holdings Corp. on November 30, 1988, prior to the issuance of any
of the corporation's stock.
Before December 1, 1988, Decision Holdings was inactive and
had never been capitalized. Its officers were Gallenberger,
secretary, and Freeman, president.
In December 1988, Kanter devised and implemented a series of
transactions to generate a $1,073,835 loss for IRA. On or about
December 1, 1988, IRA transferred its 100 shares of the common
stock of Zeus, its 1,200 shares of class A preferred stock of
Cedilla Invest., and $60,000 cash to Decision Holdings in
60
The income, expenses, and losses of Decision Holdings were
reported on the consolidated Federal income tax return filed by
IRA for the year at issue.
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