- 548 -
paid to Kanter. On his 1986 return, Kanter reported $46,925
($47,925 - $1,000) as income from loan proceeds from the Sherwood
payment and $39,480 ($39,500 - $20) as miscellaneous income from
the LBG payment.
A foreclosure action was filed against LBG. The litigation
of the foreclosure was not completed until at least 1988. During
1988, LBG was still in existence and was receiving bills from at
least one creditor, Payton and Rachlin.
Tanglewood filed a voluntary petition in bankruptcy under
chapter 11 during May 1990.
OPINION
With respect to IRA's claimed "sales" of the notes
receivable from Funding Systems, Tanglewood, LBG, and Sherwood to
Holding Co. and Kanter, evidence that the "sales" took place
primarily consists of adjusting journal entries on the books of
IRA that credited these receivables and debited "notes
receivable" owing by Holding Co. and Kanter. As the adjusting
journal entries show, neither Holding Co. nor Kanter paid cash
for these notes at the time of "sale". In 1986, repayments of
the notes were made to IRA rather than Kanter, who allegedly had
bought the notes on December 1, 1985. Thus, we think IRA failed
to establish that sales of the notes actually took place, as
evidenced by these bookkeeping entries. See J.G. Boswell Co. v.
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