-356-
2. Whether Kanter Improperly Assigned Income to THC Through
CMS Investors
Respondent does not dispute that Delta and Alpha lent
millions of dollars to Shelburne and Century, respectively. In
Durkin v. Commissioner, 87 T.C. 1329 (1986), this Court concluded
the Delta loan constituted a valid debt for tax purposes.
Respondent’s theory, nevertheless, is that THC’s distributive
share of the bonus payments from Shelburne and Century represents
Kanter’s income because Kanter (and other members of his law
firm) were the true investors and the true lenders, and THC (as a
partner in CMS Investors) was, in effect, no more than an alter
ego for Kanter. On the record presented, we disagree.
In Durkin v. Commissioner, supra at 1399-1401, the Court
held that the Shelburne bonus payment did not constitute interest
and, therefore, it was not deductible. The Court also suggested
the Shelburne bonus payment was simply a distribution of profits
from Shelburne to CMS Investors disguised as an interest payment.
Id. at 1400. From these points, respondent infers that the loans
giving rise to the bonus payments were, in effect, loans made by
Kanter and his law partners. Respondent goes well beyond the
holding of Durkin. The Court in Durkin made no such finding, and
respondent has misinterpreted the case.
We reject the argument that Kanter attempted to assign to
THC the income from the bonus payments. Although we have
concluded Kanter used THC as a conduit to receive his share of
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