-155-
in which the trusts had invested proved successful, because the
trusts had no other assets available to creditors. IFI had no
recourse against Ballard and Lisle, individually, because the
trusts, not Ballard and Lisle, had borrowed the funds and issued
the promissory notes.79
Ultimately, the movie ventures in which the trusts invested
proved unsuccessful and were not profitable. Additionally, the
Internal Revenue Service later disallowed the deductions that
Ballard claimed on his tax returns with respect to these movie
investments and Ballard was required to pay additional taxes to
the Internal Revenue Service. In July 1985, Mrs. Ballard
borrowed about $160,000 from TMT to pay the income tax liability
that she and Ballard owed.80 Exh. 94, at 10.
In 1987, IFI owed IRA in excess of $500,000 and did not have
sufficient resources to repay IRA. Exh. 34, at 2. To “clean up”
79 Kanter explained that, although, for Federal income tax
purposes, the taxable income or taxable loss of each grantor
trust was required to be reported on Ballard’s or Lisle’s tax
returns, the trusts were otherwise still separate legal entities
for State law purposes. Ballard and Lisle thus were not
personally liable upon the loans of their trusts, as Ballard and
Lisle had not personally guaranteed the loans. Kanter claimed
that he had helped the trusts obtain the loans because the movie
investments originally looked very promising.
80 The STJ report incorrectly stated that Mary Ballard
borrowed the $160,000 from either IFI or IRA. As discussed in
detail in additional findings of fact, infra pp. 178-181, the
Ballards borrowed a total of $303,943 from TMT.
Page: Previous 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 NextLast modified: May 25, 2011