-231-
2. Discussion Regarding Assignment of Income
The STJ report, at 81, erroneously states that respondent
conceded IRA, THC, and other Kanter-related entities were not
shams for tax purposes. In fact, Respondent’s Opening Brief at
718 stated in pertinent part:
Respondent asserts that the evidence shows that the
family owned entities [including IRA, THC, TMT, Carlco,
and BWK] should be disregarded as separate taxable
entities. Alternatively, if not disregarded, they are
not taxable on the moneys paid by The Five under the
assignment of income doctrine and the ‘controller of
the income” analysis.
Respondent’s Opening Brief at 719-723 is devoted entirely to the
argument that IRA, THC, and other Kanter-related entities were
shams that should be disregarded for tax purposes.
Proceeding on the misconception that respondent conceded IRA
and THC were valid entities for tax purposes, the STJ report, at
81-82, summarily concludes that the assignment of income doctrine
is inapplicable to payments IRA and THC received from PMS, Essex
Partnership, and Hyatt/KWJ Corp. because “IRA and/or THC owned
the property interests or property rights that generated the
income in question.” No consideration is given to whether IRA’s
and THC’s interests were nominal or illusory. In connection with
the foregoing, the STJ report, at 82-84, concludes the payments
from Frey and Schaffel to IRA and/or THC did not represent an
assignment of income because “IRA and THC * * * exercised
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