Estate of Kanter v. Commissioner
Decision Date | 01 February 2007 |
Docket Number | Dkt. No. 16421-90.,Dkt. No. 33557-87.,Dkt. No. 21555-91.,Dkt. No. 712-86.,Dkt. No. 7557-93.,Dkt. No. 31301-87.,Dkt. No. 20211-91.,Dkt. No. 16164-92.,Dkt. No. 21616-91.,Dkt. No. 26251-90.,Dkt. No. 22884-93.,Dkt. No. 23743-92.,Dkt. No. 1984-92.,Dkt. No. 3456-88.,Dkt. No. 32103-88.,Dkt. No. 1350-87. |
Citation | 93 T.C.M. 721 |
Parties | Estate of Burton W. Kanter, Deceased, Joshua S. Kanter, Executor, and Naomi R. Kanter, et al. v. Commissioner. |
Court | U.S. Tax Court |
93 T.C.M. 721
T.C. Memo. 2007-21 Estate of Burton W. Kanter, Deceased, Joshua S. Kanter, Executor, and Naomi R. Kanter, et al. v. Commissioner.
Dkt. No. 712-86.
Dkt. No. 1350-87.
Dkt. No. 31301-87.
Dkt. No. 33557-87.
Dkt. No. 3456-88.
Dkt. No. 32103-88.
Dkt. No. 16421-90.
Dkt. No. 26251-90.
Dkt. No. 20211-91.
Dkt. No. 21555-91.
Dkt. No. 21616-91.
Dkt. No. 1984-92.
Dkt. No. 16164-92.
Dkt. No. 23743-92.
Dkt. No. 7557-93.
Dkt. No. 22884-93.
United States Tax Court.
February 1, 2007.
Matthew J. Gries, Randall G. Dick, and N. Jerold Cohen, for petitioner.
Estate of Burton W. Kanter, Deceased, Joshua S. Kanter, Executor, in docket Nos. 712-86, 1350-87, 31301-87, 33557-87, 3456-88, 32103-88, and 26251-90.
Karen L. Hawkins, for petitioner.
Naomi R. Kanter in docket Nos. 712-86, 1350-87, 31301-87, 33557-87, 3456-88, 32103-88, and 26251-90.
Steven S. Brown and Royal B. Martin, for petitioners.
Claude M. and Mary Ballard in docket Nos. 16421-90, 20211-91, 21616-91, 1984-92, 23743-92, and 22884-93, and for petitioners.
Estate of Robert W. Lisle, Deceased, Thomas W. Lisle and Amy L. Albrecht, Independent Co-Executors, and Estate of Donna M. Lisle, Deceased, Thomas W. Lisle and Amy L. Albrecht, Independent Co-Executors, in docket Nos. 21555-91, 16164-92, and 7557-93.
John J. Comeau, Frederic J. Fernandez, James M. Klein, and Mark J. Miller, for respondent.
CONTENTS
I. Procedural History II. Amendment to Rule 183 III. Notices of Deficiency IV. New Rule 183 and the Court's Review and Adoption Procedure V. Standard of Deference Due to General Findings of Fact and Credibility Determinations Contained in the STJ Report VI. Structure of the Court's Report ISSUE I. Whether Kanter, Ballard, and Lisle Earned and Are Taxable on the Income in Dispute FINDINGS OF FACT I. Petitioners
A. Burton W. Kanter B. Claude M. Ballard C. Robert W. Lisle D. Additional Findings of Fact Regarding Ballard and Lisle 1. Ballard 2. Lisle E. Kanter-Related Entities 1. Investment Research Associates, Ltd. (IRA) a. IRA's Shareholders b. The Bea Ritch Trusts c. IRA's Officers and Directors d. IRA's Subsidiaries e. IRA's Business Activities 2. Carlco, Inc., TMT, Inc., and BWK, Inc 3. Additional Findings of Fact Regarding The Holding Co a. THC's Shareholders, Officers, and Directors b. THC's Tax Returns 4. The Administration Co., Inc., and Principal Services Accounting Corp II. Introductory Statement and Brief Introduction of The Five A. The STJ Report B. Comments Regarding the Introductory Statement and Brief Introduction of The Five III. Details Regarding The Five A. Certain Payments Made by The Five 1. Hyatt Corp.'s Payment of a Share of Its Profits on the Embarcadero Hotel's Management Contract to KWJ Corp 2. Bruce Frey's Payments to IRA From 1980 Through 1985 and to THC in 1981, 1983 1984, and 1987 a. The Frey/THC Agreement b. The Frey/Zeus Agreement c. BJF Partnership d. Summary of Frey Payments to Zeus e. Summary of Frey Payments to THC 3. Payments From William Schaffel to IRA From 1979 Through 1983 and to THC From 1984 Through 1986 a. Sale of IBM Building b. Torcon Transactions With Prudential c. Walters's Transactions With Prudential d. Walters's Transactions With Travelers e. Schaffel's Payments to IRA and THC f. Four Ponds, FPC Subventure, and One River Partnerships (i). Four Ponds Partnership (ii). FPC Subventure Partnership (iii). One River Partnership (iv). Meyers's Memorandum Regarding Four Ponds Partnership (v). FPC Subventure's Tax Returns 4. Schnitzer/PMS Payments From 1979 Through 1989. 124 5. Payments from Eulich/Essex Partnership to IRA and THC From 1982 Through 1989 a. John Eulich b. Allen Ostroff c. Hotel Management Industry Trends d. The Gateway Hilton and John Connolly e. Gateway Hotel Management Co. and Essex Corp f. MHM and GHM Hotel Management Contracts g. Essex Partnership h. Essex Partnership Operations i. GHM's and MHM's Representation and Marketing Agreements j. Transfer of IRA's Essex Partnership Interest k. Payments to Essex Partnership and Essex Partnership Distributions
B. Certain Loans, Payments, and Other Benefits That Ballard and Lisle and/or Their Family Members Received IV. Additional Findings of Fact: The Flow of Funds A. Payments Made by The Five to IRA and Its Subsidiaries From 1977 to 1989 1. Payments Made During 1977 Through 1983 2. Payments Made During 1984 to 1989 B. Distribution of the Funds Paid by The Five in Connection With the Various Prudential Transactions to Kanter, Ballard, Lisle, and Their Respective Family Members 1. Additional Details Regarding Management and Control of Carlco, TMT and BWK a. Carlco b. TMT c. BWK 2. IRA's Transfers to Carlco, TMT and BWK of Funds Paid by The Five a. Funds Paid by The Five to IRA During 1977 Through 1983 Transferred to Carlco, TMT, and BWK (i). Transfers From Zeus to IRA (ii). IRA's Transfer of Its Interest in Essex Partnership (iii). IRA's Transfer of Its Interest in Sherwood Partnership (iv). Accounting Treatment (v). Additional Capital Contributions to Sherwood Partnership b. Transfer of Funds Paid by The Five During 1984 Through 1989 to Carlco, TMT and BWK 174 (i). Hyatt Corp (ii). Frey (iii). Schnitzer/PMS (iv). Essex Partnership c. Carlco, TMT, and BWK Capital Accounts 3. The Disposition of Funds From Carlco, TMT, and BWK for the Benefit of Ballard Lisle, Kanter, and Their Families a. Ballard's Use and Enjoyment of TMT's Assets (i). TMT's Various Accounts (ii). Loans From TMT to Ballard and Ballard Entities (iii). TMT's Property Transferred to Ballard (iv). Investment in Melinda Ballard's Company (v). Ballard's Disclosures to Goldman Sachs (vi). TMT's Assets b. Lisle's Use and Enjoyment of Carlco's Assets (i). Carlco's Various Accounts (ii). Lisle's Personal Use of Carlco's Funds (iii). Carlco's Assets c. Kanter's Use and Enjoyment of BWK's Assets (i). Salaries and Officer Compensation Paid to Kanter and His Son (ii). Loans (iii). Gifts C. Other Means Used To Transfer Funds for the Benefit of Ballard, Lisle, Kanter, and Their Respective Families 1. Payments From IRA, KWJ Corp., and KWJ Partnership a. IRA Payments to Ballard and Lisle in 1982 b. Consulting Fees Paid by KWJ Corp. and KWJ Partnership to Ballard's and Lisle's Adult Children 2. Additional Loans a. IRA Loans to Kanter b. Loans to Ballard, Lisle, Their Family Members, and Their Trusts (i). Ballard's Grantor Trusts (ii). Lisle's Grantor Trusts (iii). International Films, Inc (iv). Harbor Exchange Lending Operation 196 (v). Loans to Lisle and His Trusts (vi). Loans to the Ballards and Their Trusts
(vii). Writeoff of Loans and Claimed Losses (viii). Loans to Lisle's RWL Cinema Trust During 1988 to 1990 D. Summary of Funds Paid by The Five to IRA and Disposition of Those Funds for the Benefit of Kanter, Ballard, Lisle, and Their Families E. Payments Made by The Five to THC and Its Subsidiaries During 1981 Through 1989 F. Distribution of Funds From THC to Kanter G. The Flow of Funds From Four Ponds and One River Through FPC Subventure to Kanter and Lisle V. Additional Findings of Fact Regarding the Examination Process and Summons Enforcement Proceedings A. Failure To Cooperate During the Audit B. IRS Summonses C. Summons Enforcement D. Requests for Production of Documents 219 OPINION A. The Parties' Positions B. The Assignment of Income Doctrine C. Errors in the STJ Report 1. The STJ Report Reflects a Misunderstanding of Respondent's Theory Regarding the Kickback Scheme 2. Discussion Regarding Assignment of Income 3. Failure To Address Respondent's Flow-of-Funds Argument 4. Incomplete Discussion Regarding Loan Arrangements 5. Discussion Regarding Consulting Payments to Ballard's and Lisle's Adult Children 6. Manifestly Unreasonable...
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