- 552 -
that the sale to Kanter was not entered into for profit by IRA,
but was an attempt to establish a 1985 loss for tax purposes.
Given the fact that IRA and Holding Co. were owned by trusts
for the benefit of Kanter's family, that Kanter controlled the
management of IRA and Holding Co., that he largely determined the
sale prices, that the values placed on the notes by Kanter were
contradicted by other evidence, that the sale prices were nominal
compared to the face amount of the notes, and that the admitted
purpose of the sales was to establish losses for tax purposes, we
conclude that the "sales" (if they took place) lacked economic
substance and, therefore, did not constitute identifiable events
for purposes of loss recognition.
As confirmed by Kanter's testimony, the "sales" were merely
attempts by IRA to claim deductions for alleged worthlessness or
alleged partial worthlessness of debts without meeting the
requirements of section 166. If the Court were to recognize such
practices as bona fide sales for purposes of loss recognition,
section 166 would be substantially undermined. The scheme
employed, as a purported sale, does not establish the amount, if
any, of loss incurred; consequently, the losses purportedly
realized are not recognized.
In addition, we hold that IRA failed to establish that the
notes receivable were not sold to related parties within the
meaning of section 267.
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