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this fee may have been intended only as additional security.23
We cannot agree that provision for this fee alone establishes a
trade or business.
In addition, the guaranties made with respect to IBC do not
establish a trade or business for petitioner. Several, if not
all, of the guaranties were made in connection with IBC’s or a
subsidiary’s acquisition of another business or company.
Petitioner made those guaranties as a means of accomplishing the
acquisition and only after he was approached by the company and
informed that the deal might not go through. The receipt of a
guaranty fee appears to be just an afterthought with respect to
those guaranties. For example, petitioner testified with respect
to the 1984 guaranty of the IBC loan:
Q And why did you do the loan guarantee?
A Because it was necessary to expedite the
transaction, and I felt that it was a good business
proposition. I thought the value was -- in the
collateral was excellent. And I charged a fee for
doing it.
Also, with respect to IBC Amusement Rides, Inc.’s acquisition of
the Ice Capades and the Harlem Globetrotters, petitioner
testified as to why he signed a guaranty: “Well, again, it was a
way of expediting the transaction. It was done through a bank I
23Respondent contends that the rescission of the WMG
commitment fee shows it was “intended as additional security
rather than as an intended source of profit for petitioner.”
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