-157-
firm offices of Albert Morrison (MAF’s president). Freeman (who
was then IRA’s president) had asked Morrison (a certified public
accountant and longtime friend of Kanter) to be MAF’s president.
Mr. Morrison received no salary for being MAF’s president. As
MAF’s president, he approved the purchase by MAF of the
promissory notes from the trusts as a favor to Kanter.82
IRA subsequently also sold 100 percent of IFI’s outstanding
shares of stock to Linda Gallenberger for $1 in September 1988.
Shortly thereafter, Ms. Gallenberger placed IFI into bankruptcy.
On its 1987 tax return, IRA claimed losses with respect to
its sale of the trust notes to MAF. IRA also claimed bad debt
deductions with respect to the individual notes of Ballard and
Lisle that it obtained from IFI. It further claimed a $65,000
worthless security deduction with respect to the IFI shares that
were later sold to Ms. Gallenberger.
For substantially all of the period from about 1983 to 1989,
KWJ Corp. (an IRA subsidiary) and later the KWJ Partnership
(whose partners were IRA’s subsidiaries BWK, Carlco, and TMT)
paid monthly “consulting fees” of $1,000 each to Ballard’s two
daughters and to Lisle’s son and daughter. After the Internal
Revenue Service commenced examinations of many of Ballard’s,
82 IRA’s purported sale of promissory notes to MAF, Inc.,
is discussed in detail in additional findings of fact. See infra
pp. 196-205.
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