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secured by any collateral, nor was there any evidence of payments
on the loans. Although these loans were listed on IRA's books
and records as "Notes Receivable" or "N/R", no notes or any other
written acknowledgment of the alleged loans was introduced into
evidence. With the exception of Kanter, in his capacity as
trustee of the HGA Cinema Trust, none of the alleged debtors
testified as to the existence of any debt. In our view, IRA's
lack of notes or other written acknowledgment of the existence of
these debts, lack of any collateral, and lack of repayments
indicate that, like the payments to the Ballard and Lisle family
trusts, IRA never intended that the alleged debtors would be
required to repay these funds. Consequently, the alleged loans
did not exist. In sum, we conclude that IRA failed to establish
that the claimed notes receivable represented valid debts
stemming from debtor-creditor relationships and, therefore,
failed to show that it had any basis from which any loss could be
determined on their purported sales.
Economically, the sales of the notes receivable of
$1,760,682 for $12 make no sense. If the notes were not
worthless, IRA would not have sold them for $12. If the notes
were worthless, an unrelated third party would not have had any
interest in purchasing them for $12.
Kanter testified that he and Freeman agreed that the notes
receivable in question were worthless. Kanter explained that the
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