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partnership interest in Essex Partnership and its interest in KWJ
Corp. (both of which provided a steady stream of cash payments
and distributions), and IRA distributed to Carlco, TMT, and BWK
the annual installment payments that it received from PMS. These
distributions did not, however, represent an allocation of IRA’s
“free cash-flow” as Kanter alleged. IRA was transferring to
Carlco, TMT, and BWK shares of the payments derived (and to be
derived) from transactions with The Five.
Two facts demonstrate that Kanter’s explanation regarding
the distributions to Carlco, TMT, and BWK are not to be believed.
First, we note that the only asset transferred to Carlco, TMT,
and BWK with no apparent connection to The Five was a portion of
IRA’s interest in Sherwood/Forest Activities Partnership. By our
reckoning, this partnership did not provide any cashflow at all
and merely served as a source of deductions to shelter from
taxation a portion of Carlco’s, TMT’s, and BWK’s income for 1984
to 1987. Kanter’s explanation is also belied by the fact that
IRA held large of amounts of cash during the period 1984 to 1989
(particularly 1987) that it invested in CDs rather than
distribute to Carlco, TMT, and BWK. Thus, although Kanter
recommended that Carlco, TMT, and BWK should receive funds from
IRA in a 45/45/10 percent split of IRA’s free cashflow, Kanter’s
recommendation was instead part of a preexisting agreement among
Kanter, Ballard, and Lisle to share payments from The Five.
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