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Holdings engaged in any business activities. Kanter orchestrated
the series of transactions to create phony losses for IRA.
No one who had been an officer or director of Decision
Holdings at the time of the transactions provided any testimony
in connection with this issue at the trial. IRA did not present
a general ledger, cash receipts journal, or cash disbursements
journal in connection with Decision Holdings for 1988.
Kanter's testimony regarding his "having to do the deal in a
hurry" is ambiguous at best and provides no credible explanation
as to why a seasoned investor would get into a supposedly profit-
motivated deal on December 1, without "really doing any due
diligence", and then dispose of the assets 29 days later at a
loss without any significant intervening events. It seems that
the only hurry on Kanter's part was to finish the deal before the
end of the tax year so that IRA could take advantage of a loss of
more than $1 million.
Accordingly, we hold that the claimed loss deduction was
correctly disallowed by respondent because the transactions
giving rise to the loss had no independent economic substance and
were entered into solely for tax reasons. Therefore, IRA is not
entitled to the claimed loss deduction.
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