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significant control over Kanter’s activities”,109 and Frey and
Schaffel both entered “into an agreement to obtain the services
from IRA and/or THC.” Again, no consideration is given to
whether IRA and THC merely served as Kanter’s alter egos.
Because respondent never conceded that IRA and THC were not
shams, these portions of the STJ report are manifestly
unreasonable.110
3. Failure To Address Respondent’s Flow-of-Funds Argument
The STJ report, at 81 note 35, states that respondent’s
kickback theory was “unsupported by the evidence”. What is
lacking, however, is any mention or discussion of respondent’s
detailed flow-of-funds analysis. We can only conclude the STJ
report did not contain an analysis of the flow of funds because
of the misconception that respondent conceded IRA, THC, Carlco,
TMT, BWK, and other Kanter-related entities were not shams. A
thorough evaluation of the evidence concerning the flow of funds
is crucial to a just and proper determination in these cases.
4. Incomplete Discussion Regarding Loan Arrangements
The STJ report, at 78-80, rejects respondent’s argument that
Ballard and Lisle received portions of their shares of the
109 There are no recommended findings of fact in the STJ
report in support of a finding that IRA or THC exercised
significant control over Kanter. As discussed below, the record
shows just the opposite.
110 The question whether IRA and THC were shams also was
particularly relevant to respondent’s determination that Kanter,
Ballard, and Lisle were liable for additions to tax for fraud.
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