Investment Research Associates - Page 522




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          bonds, and other security interests to MAF for nominal                       
          consideration.62                                                             
               On December 17, 1987, IRA acquired notes receivable totaling            
          $1,120,889 from IFI in cancellation of IFI's $507,648 note due to            
          IRA.  This transfer included the notes receivable listed above               
          except those due from HELO and Cedilla Invest. in the amounts of             
          $485,824 and $345,868, respectively.  (This is the same                      
          transaction in which IRA acquired the Ballard, Lisle, and                    
          Abernathy notes previously discussed.)  While the principal                  
          amounts of the notes acquired from IFI were greater than the                 
          amounts set forth above, through an adjusting journal entry IRA              
          reduced the basis of these notes.  On December 30, 1987, IRA sold            
          the notes for $1 each to MAF in an attempt to establish                      
          worthlessness.  Kanter testified that IRA knew that the notes                
          were worthless at the time IRA acquired the notes from IFI.  The             
          transaction was entered into by IRA and IFI as a means to shift              


          62                                                                           
               Kanter assisted the CMB and RWL Trusts in obtaining these               
          loans from IRA and IFI to permit the trusts to invest in various             
          movie partnerships.  The loans to the trusts essentially amounted            
          to nonrecourse loans to Ballard and Lisle, as Ballard and Lisle              
          had no legal obligation to repay the loans.  However, because the            
          trusts were grantor trusts, Ballard and Lisle claimed the tax                
          benefits from the trusts' movie partnership investments on their             
          respective individual income tax returns.  During the year at                
          issue, Cedilla Invest. was a subsidiary of IRA and is the same               
          entity that was involved in the equipment leasing transactions               
          considered in Issue 22.  During 1983 and 1984, HELO was a                    
          subsidiary of Holding Co.  Elk Investment and Inter Alia                     
          Investment had likewise borrowed funds to invest in unsuccessful             
          movie partnerships.                                                          





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