-392-
purported satisfaction of the notes receivable held by Cashmere,
and, finally, (5) Waco’s sale of Cashmere stock to Equity.
Considering Zell simply wanted to acquire the real estate
partnership interests held by Kanter’s grantor trusts, and taking
into account Kanter’s desire to avoid recognizing gain on the
sale to Zell to the extent his grantor trusts had negative
capital accounts in the partnership interests, it is clear the
rapid series of transactions described above, particularly the
transfer of notes receivable to Cashmere, was carried out for no
reason other than to avoid Federal income tax. Moreover, Waco’s
promissory notes to Kanter’s grantor trusts ostensibly provided
additional tax benefits in that Kanter reported the gains
realized on the sale of Cashmere stock to Waco under the
installment method, even though Equity paid Waco in full in 1983.
In the absence of any showing that Cashmere served any legitimate
business purpose before or after the transactions described
above, we sustain respondent’s determination that the transfers
of the partnership interests with negative capital accounts to
Cashmere constitute money received by Kanter (through his grantor
trusts) and Kanter is taxed on the gain resulting from the
transfers up to the full amount of the assumed liabilities.
2. Applicability of Section 357(c)
Section 357(c)(1)(A) provides that, in the case of an
exchange to which section 351 applies, if the amount of the
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