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he had transferred his “carried interest” in Hi-Chicago Trust to
THC.
Kanter’s testimony on this point is self-serving and
unconvincing. In effect, petitioners assert Federman and the
trust beneficiaries, in agreeing to the 1972 arrangement, made a
“gift” to Kanter. However, the Court does not believe Federman
and the trust beneficiaries were acting out of a “detached and
disinterested generosity” to Kanter. See Commissioner v.
Duberstein, 363 U.S. 278, 285-286 (1960). Undoubtedly Federman
and the trust beneficiaries were eager to have Kanter serve as
trustee and manage the trust’s investments inasmuch as Kanter had
extensive business contacts and he offered the promise of
lucrative returns on the trust’s investments. Such profitable
trust investments could greatly benefit the trust’s
beneficiaries. The “carried interest” provided a direct
financial incentive to Kanter, as trustee and manager, to seek
out and make profitable investments on behalf of Hi-Chicago
Trust.131
131 Petitioners offered no testimony from Federman or the
trust beneficiaries. Nor did petitioners present any evidence as
to whether a gift tax return was filed with respect to the
granting of the “carried interest” to Kanter in the early 1970s.
Petitioners’ failure to offer such evidence leads the Court to
conclude this evidence would have been harmful to petitioners’
case. See Wichita Terminal Elevator Co. v. Commissioner, 6 T.C.
1158, 1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947).
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