Investment Research Associates - Page 502




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          from Holding Co. in exchange for a receivable owing by IRA to                
          Holding Co.                                                                  
               Pursuant to Kanter's instructions, on December 1, 1985, IRA             
          sold the receivables due from Tanglewood, LBG, and Sherwood to               
          Kanter for $10,000, $10, and $1,000, respectively, and sold the              
          receivable due from Funding Systems to Holding Co. for $20,000.              
          With respect to each of the sales, Kanter determined the sales               
          price.  The sale prices were not determined by arm’s-length                  
          negotiations.                                                                
               Neither Kanter nor Holding Co. paid cash to IRA for the                 
          receivables.  Instead, receivables due from Kanter and Holding               
          Co., in the amounts of the respective sale prices of the                     
          receivable, were recorded through adjusting journal entries on               
          the books of IRA.  The sole purpose of the sales was an attempt              
          by Kanter to provide a basis for IRA to claim a deduction for                
          Federal income tax purposes.                                                 
               According to IRA's general ledger, on February 19, 1986, the            
          $39,500 lent to LBG by IRA and the $47,925 lent to Sherwood by               
          IRA was repaid to IRA in full.  On February 28, 1986, Tanglewood             
          repaid $6,000 of its loan from IRA, and on June 24, 1986, IRA                
          received repayments on the Funding Systems note in the amounts of            
          $10,000, $4,500, and $10,000.   The payments from Funding Systems            
          were credited to Holding Co. by an adjusting journal entry on                
          IRA's general ledger.  The payments from Sherwood and LBG were               






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