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Commissioner, 34 T.C. 539, 545 (1960), affd. 302 F.2d 682 (9th
Cir. 1962).
Moreover, the transactions did not establish bona fide
losses for Federal income tax purposes. Kanter testified that
the purpose of IRA's purported sale of the Funding Systems note
to Holding Co. was to "establish the loss in the manner I have
described before." He testified earlier that he had problems
getting the Internal Revenue Service to allow deductions for
items that he thought were worthless, so he decided the best way
was to sell a note to establish a loss.
IRA was owned by BRT, the beneficiaries of which were
members of Kanter's family. Holding Co. was partially owned by
Kanter and BRT. Kanter was counsel to IRA and Holding Co. and,
at various times, was also an officer or director. There is no
evidence that anyone, other than Kanter, had a role in
establishing the sale prices for the notes. Kanter acknowledged
that he "largely determined" the sale prices for the notes.
Hence, the sale prices were not determined by arm's-length
negotiations.
Kanter's testimony regarding the "sales" further indicates
their lack of economic substance. With respect to the Funding
Systems note receivable, he testified, on direct examination,
that Funding Systems had filed for bankruptcy, that he did not
remember the exact date, but thought it was in the early 1980's,
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