1 Donna M. Lisle, and her estate, is a participant in this dispute solely as a result of

having filed joint tax returns with Robert W. Lisle. 

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-60862 

(Consolidated with 07-60863 and 07-60864)

ESTATE OF ROBERT W. LISLE, Deceased; ESTATE OF DONNA M. LISLE,

Deceased

Petitioners-Appellants,

THOMAS W LISLE, Independent Co-Executor; AMY L. ALBRECHT,

Independent Co-Executor,

Appellants

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

Appeals from a Decision of

the United States Tax Court

Before HIGGINBOTHAM, DAVIS and BARKSDALE, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

This case returns to this court for the second time for review of the Tax

Court’s judgment that taxpayers Robert W. Lisle and his wife Donna M. Lisle1

failed to declare and pay income tax on approximately $1,280,000 in revenue

United States Court of Appeals

Fifth Circuit

F I L E D

August 25, 2008

Charles R. Fulbruge III

Clerk
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

2 For a detailed description of the Five, see Lisle I.

2

earned as a result of Robert Lisle’s relationship with a series of real estate deals

and related transactions. See Estate of Robert W. Lisle v. Comm’r, 341 F.3d 364

(5th Cir. 2003)(Lisle I). In this appeal, like the first, the Tax Court found that

Robert W. Lisle, along with Claude M. Ballard and Burton W. Kanter, earned

the unreported income through an elaborate kickback scheme involving the sale

of influence by Lisle and Ballard through their positions in the Real Estate

Department at Prudential Life Insurance Co. of America. The Commissioner

asserted that Kanter kicked back commissions he or his corporation earned to

Lisle and Ballard in return for their influence. The unreported revenue

allegedly arose from five arrangements, sometimes called “the Five,” made

between Kanter and (1) J.D. Weaver (also called the Hyatt-Embarcadero

transaction), (2) Bruce Frey, (3) William Schaffel, (4) Kenneth Schnitzer, and (5)

John Eulich (also called the Essex transaction).2In each instance, Kanter dealt

with clients who were seeking to do business with Prudential. Two of the deals

involved hotel management contracts, another a property management contract,

another involved the conversion of apartment complexes to condominiums, and

still another involved assistance with selling and financing real estate

transactions. The Tax Court further found that the kickbacks were distributed

among Lisle, Ballard and Kanter in a 45-45-10 percent split through numerous

transactions involving various corporations and trusts, favorable loans, and

payments to Lisle’s children. 

In this appeal, unlike the first, we have the benefit of the fact findings and

conclusions of the Special Trial Judge that were rejected by the Tax Court and

obscured in the first appeal. With the benefit of a complete record, our equivocal

findings in the first appeal, and the findings of the Eleventh Circuit in the

appeal of the related case affecting taxpayer Ballard, Ballard v. Comm’r, 522
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

3

F.3d 1229 (11th Cir. 2008)(Ballard III), we conclude thattheTax Court reviewing

the report of the Special Trial Judge failed to give due regard to the factfindings

of the trial judge and erred in issuing a judgment contrary to those findings.

Accordingly, for the reasons setforth below, we vacate the Tax Court’s judgment

as to the Lisles and remand with instructions to issue a final order adopting the

Special Trial Judge’s report. 

I. 

The cases for income tax deficiencies against Lisle, Ballard and Kanter

were consolidated in the Tax Court. In the Lisle case that proceeded through

this circuit,the Tax Court ruled thatthe taxpayers fraudulently failed to declare

and pay income tax on approximately $1,280,000 of income. In Lisle I,this court

reversed the Tax Court’s finding of fraud, affirmed the Tax Court’s ruling

sustaining the assessment of a deficiency for years 1987, 1988 and 1989, and

remanded the case to the Tax Court for the limited purposes of recalculating the

deficiencies and additions to the tax consistent with the opinion. Lisle I. The

Supreme Court later granted certiorari in two related cases from the Seventh

and Eleventh Circuits (Ballard v. Comm’r, 321 F.3d 1037 (11th Cir.

2003)(Ballard I), and Estate of Kanter v. Comm’r, 337 F.3d 833 (7th Cir. 2003))

and reversed. Ballard v. Comm'r of Internal Revenue, 541 U.S. 1009 (2004) and

544 U.S. 40 (2005). As we explain below, the basis for the Supreme Court’s

reversal was the failure of the Tax Court to follow proper procedure.

In the Tax Court, prior to the first appeal to this circuit, the Chief Judge

of the Tax Court had assigned the consolidated case to Special Trial Judge D.

Irwin Couvillion for trial. Judge Couvillion presided over a five-week trial in the

summer of 1994. Around September 1998, Judge Couvillion submitted a 303

page written report containing his findings of facts and opinions to the Chief

Judge for subsequent review by a Tax Court Judge. The parties were not
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

4

provided a copy of Judge Couvillion’s report. The Chief Judge assigned the case

to Tax Court Judge H.A. Dawson, Jr. for his review and final disposition. On

December 15, 1999, Judge Dawson issued the opinion of the Tax Court. (T.C.

Memo 1999-407; see Investment Research Assocs. Ltd. v. Commissioner, T.C.

Memo 1999-407, 1999 Tax Ct. Memo LEXIS 463, 78 T.C.M. (CCH) 951 (1999)).

Judge Dawson found that Ballard, Kanter and Lisle had acted with intent to

deceive the Commissioner and held them liable for underpaid taxes and

substantial fraud penalties. Judge Dawson’s opinion purported to adopt the

findings contained in the report submitted by Judge Couvillion. But we now

know that this was not entirely accurate.

As stated by the Eleventh Circuit:

We now know, based on new documents filed with this Court, that

the following events occurred in the Tax Court: 

1. Judge Couvillion's original report initially recommended that

Ballard [nor Kanter or Lisle] was not liable for the deficiencies in

tax asserted against him. Specifically, Judge Couvillion concluded

that "there were no 'kickback schemes,' and none of the alleged

'kickback schemes' payments by 'The Five' represented unreported

income of Kanter, Ballard, and Lisle. There was, therefore, no

underpayment oftax." In fact, Judge Couvillion's original report did

not consider the government's allegation of fraud "as even rising to

the level of suspicion of fraud."

2. After Judge Dawson was assigned to the case, he reviewed Judge

Couvillion's original report and advised the Chief Judge that he

disagreed with it. Approximately one week later, on or about August

27, 1998, then Chief Judge Cohen advised Judge Dawson that she

also disagreed with Judge Couvillion's original report. 

3. A conference was scheduled between Chief Judge Cohen, Judge

Dawson, and Judge Couvillion. It appears that shortly before this

conference was to take place, Judge Couvillion was aware that both

Chief Judge Cohen and Judge Dawson disagreed with his report.
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

5

4. On September 1, 1998, Judge Couvillion withdrew his original report.

5. Chief Judge Cohen assigned Judge Dawson and Judge Couvillion

to write a "collaborative report." This "collaborative report" stood in

stark contrast to Judge Couvillion's original report. In fact, the

collaborative report now concluded that Ballard [as well as Kanter

and Lisle] should be liable for the deficiencies in tax asserted

against him.

6. On October 25, 1999, Judge Dawson adopted the "new

collaborative report."

7. On November 4, 1999, Chief Judge Cohen adopted the "new

collaborative report" with some minor modifications.

8. On December 15, 1999, Chief Judge Cohen formally assigned the

case to Judge Dawson, and the "new collaborative report" was filed

as the decision of the Tax Court.

Ballard v. Comm'r, 429 F.3d 1026, 1029 (11th Cir. 2005)(Ballard II) .

The taxpayers suspected thatthe documentlabeled Opinion ofthe Special

Trial Judge was not in fact Judge Couvillion’s original ruling. They filed

motions in the Tax Court seeking access to Judge Couvillion’s original ruling,

which motions were denied. The taxpayers appealed to their respective circuit

courts, including this court, all of which treated Judge Dawson’s opinion as the

Opinion ofthe SpecialTrial Judge. Kanter and Ballard appealed to the Supreme

Court which granted certiorari to resolve the question whether the Tax Court

may exclude from the record on appeal Rule 183(b) reports submitted by special

trial judges. 

The Supreme Court held that Tax Court Rule 183 did not describe or

authorize the collaborative effort with regard to the trial judge’s opinion and the

Tax Court was not authorized to exclude from the record on appeal reports by

special trial judges pursuant to Rule 183(b). Rule 183 further requires the Tax

Court Judge to give due regard “to the circumstance thatthe Special Trial Judge
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

6

had the opportunity to evaluate the credibility of witnesses, and the findings of

fact recommended by the Special Trial Judge shall be presumed to be correct.”

Tax Court Rule 183(c)(2000 ed.), as cited in Ballard, 544 U.S. at 53. Appellate

review is impeded and the standards are meaningless when the Tax Courtjudge

collaborates in the specialtrial judge’s opinion. The Supreme Court reversed the

judgments affirming the Tax Court judgments which were rendered without

giving proper deference to the trial judge’s findings and the cases were remanded

for further proceedings. Ballard, 544 U.S. at 65. 

In response to the Supreme Court’s opinion, this court recalled its

mandate and remanded the case to the Tax Court with orders to:

(1) Strike the "collaborative report" that formed the basis of the Tax

Court's ultimate decision; (2) reinstate Judge Couvillion's original

report; (3) refer this case to a regular Tax Court judge who had no

involvementin the preparation of the aforementioned "collaborative

report" and who shall give "due regard" to the credibility

determinations of Judge Couvillion, presuming that his fact findings

are correct unless manifestly unreasonable[, in dealing with the

remaining issues oftax deficiency]; and (4) Adhere strictly hereafter

to the amended Tax Court Rule in finalizing Tax Court opinions. 

Estate of Robert W. Lisle v. Comm’r, 431 F.3d 439, 439-40 (5th Cir. 2005) (Lisle

II), adopting the Eleventh Circuit’s approach on remand in Ballard II, 429 F.3d

at 1032.

On remand,the Tax Court assigned the case to Judge Haines. He adopted

some of the Special Trial Judge’s findings, rejected other recommended findings

and credibility determinations as manifestly unreasonable and supplemented

other recommended findings because he viewed them as incomplete. Judge

Haines concluded that Lisle was liable for income tax deficiencies. Our remand

in Lisle II did not disturb this court’s decision to reverse the imposition of fraud

penalties against Lisle, so the fraud issue is no longer part of this case. Lisle

now appeals the Tax Court’s judgment which it rendered following our remand.
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

7

II.

Lisle argues first that the Tax Court failed to give appropriate deference

to the findings of the Special Trial Judge. The Tax Court’s review of the opinion

ofthe Special Trial Judge is restricted by Rule 183. In reviewing the report “Due

regard shall be given to the circumstance that the Special Trial Judge had the

opportunity to evaluate the credibility of witnesses, and the findings of fact

recommended by the Special Trial Judge shall be presumed to be correct.”

Ballard, 544 U.S. at 53. The government asserts that because the Special Trial

Judge has no authority to decide the case, it is the Tax Court Judge who must

decide the case. Thus, according to the government, just as the Tax Court’s

factual findings are generally reviewed for clear error, so too should the Tax

Court’s rejection of the Special Trial Judge’s findings of fact and credibility

determination be reviewed for clear error. 

Lisle argues that our focus should be on whether the findings of the

Special Trial Judge are supported by the record. We agree. As stated by the

Eleventh Circuit in its opinion in the parallel case affecting taxpayer Ballard, 

After the Tax Court Judge has conducted his review and issued a

final opinion, we generally review this opinion for clear error. See

Stone, 865 F.2d at 344; 26 U.S.C. § 7482(a)(1) (instructing Courts of

Appeals to review Tax Court decisions in the same manner as

district court decisions on civil cases tried without a jury);

Fed.R.Civ.P. 52(a)(6) (instructing that Courts of Appeals can set

aside the district court's findings on cases tried without a jury if

they are clearly erroneous). However, when the Tax Court Judge

rejects the Special Trial Judge's findings and we are faced with a

conflicting report and opinion, we determine whether the Tax Court

Judge committed clear error by rejecting the Special Trial Judge's

findings as clearly erroneous by reviewing the Special Trial Judge's

report to determine if his findings were, indeed, without record

support. Matter of Multiponics, Inc., 622 F.2d 709, 712-13, 722 (5th

Cir. 1980) (applying Rule 52(a) to bankruptcy proceedings, wherein

the district court rejected the Special Master's findings, and holding
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

8

that "we must review the findings of the Special Master and may

affirm the [d]istrict [c]ourt's reversal only if we also deem the

Master's findings clearly erroneous"). 

Ballard III, 522 F.3d at 1235 (footnotes omitted). Wright & Miller state the

general rule regarding appellate review when the district court has rejected the

special master’s findings as follows: “The more common view is that it is the

findings of the master that are then measured by the ‘clearly erroneous’ test.”

9C Charles Wright & Arthur Miller, Federal Practice and Procedure § 2584 (3d

ed. 2008). In Bazemore v. Stehling, 396 F.2d 701 (5th Cir. 1968), we considered

the analogous standard of review we apply when reviewing the judgment of a

district court which in turn reviewed the findings of a bankruptcy referee. First,

the referee in a bankruptcy case must set forth his findings of fact and

conclusions of law. Id. at 702. For the court of appeals to review the findings of

the district judge, accepting or rejecting the referee’s findings, this court must

examine the evidence to determine not whether the district court’s findings were

clearly erroneous, but whether the findings of the referee were. Id. at 703. If

the findings of the referee were not clearly erroneous, the district judge was

bound to accept them. Id. 

This court adopted the position ofthe Eleventh Circuit that the Tax Court

Judge may disturb the Special Trial Judge’s findings of fact and credibility

determinations only if they are “manifestly unreasonable.” Lisle II, 431 F.3d at

440 (in order remanding this case to the Tax Court), citing Ballard, 429 F.3d at

1031 and 1032. 

According to the Supreme Court, 

[The clear error] standard plainly does not entitle a reviewing court

to reverse the finding of the trier of fact simply because it is

convinced that it would have decided the case differently. The
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

9

reviewing court oversteps the bounds of its duty . . . if it undertakes

to duplicate the role of the lower court. In applying the clearly

erroneous standard to the findings of a district court sitting without

a jury, appellate courts must constantly have in mind that their

function is not to decide factual issues de novo. If the district court's

account of the evidence is plausible in light of the record viewed in

its entirety, the court of appeals may not reverse it even though

convinced that had it been sitting as the trier of fact, it would have

weighed the evidence differently. Where there are two permissible

views of the evidence, the factfinder's choice between them cannot

be clearly erroneous. 

Anderson v. Bessemer City, 470 U.S. 564, 573-74, 105 S. Ct. 1504, 1511-12, 85 L.

Ed. 2d 518 (1985) (internal quotation and citation omitted). Further, 

when a trial judge's finding is based on his decision to credit the

testimony of one of two or more witnesses, each of whom has told a

coherent and facially plausible story that is not contradicted by

extrinsic evidence, that finding, if not internally inconsistent, can

virtually never be clear error. 

Id. at 575, 105 S. Ct. at 1512. A trial judge’s credibility determinations are due

this extra deference because "only the trial judge can be aware of the variations

in demeanor and tone of voice that bear so heavily on the listener's

understanding of and belief in what is said." Id. For these reasons, we agree

with the taxpayer that the Tax Court did not give the required deference to the

findings of the Special Trial Judge. Applying the correct standard of review, we

turn now to review the Special Trial Judge’s Report.

III.

We are aided at this stage by this court’s prior decision in this case and by

the decision of the Eleventh Circuit reviewing the same and findings with

respect to a different taxpayer, Ballard, who like Lisle was an executive at

Prudential. At the outset, it is important to note that when this court affirmed

the original decision of the Tax Court and found that Lisle was liable for the tax

deficiencies, we found that “much of the evidence is equivocal” and concluded
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

10

that “when the burden of proof is by a preponderance ofthe evidence, we will not

find clear error if the evidence supports either of two theories.” Lisle, 341 F.3d

at 383. Since in Lisle I this court understood that the Special Trial Judge had

made critical fact findings against the taxpayers, the balance tipped in favor of

affirming the deficiencies. However, now that we know that the trier of fact

actually found in favor of the taxpayers, that equivocal evidence is insufficient

to overturn the Special Trial Judge’s findings. 

The Special Trial Judge’s findings have also been upheld by the Eleventh

Circuit in the related case against taxpayer Ballard. Ballard v. Comm’r, 522

F.3d 1229 (11th Cir. 2008)(Ballard III). That ruling is relevant to this case

against Lisle because the deficiencies imposed by the Tax Court against Ballard

result from the same findings involving the same Five transactions relied on for

the deficiencies against Lisle. Also, the government’s theory against Ballard and

Lisle was identical: that both Ballard and Lisle, while they were executives at

Prudential, sold their influence in return for kickbacks that generated the

alleged unreported income. The Eleventh Circuit concluded 

that Judge Couvillion’s findings of fact and credibility

determinations were supported by the record and that his finding

that Ballard was not responsible for a deficiency and had not

committed fraud were not manifestly unreasonable. We conclude

that, in finding otherwise, Judge Haines did not presume Judge

Couvillion’s findings to be correct or give Judge Couvillion’s

credibility determinations their due deference. See Tax Court Rule

183. Rather Judge Haines conducted a nearly de novo review of the

facts. This review violated Rule 183's and our instructions. See

Anderson, 470 U.S. at 573-74, 105 S.Ct.at 1511-12. It is clear that

this case is a “close call.” Had Judge Haines been the original trial

judge, his rulings would probably be entitled to affirmance.

However, he was not the trial judge and did not see or hear the

witnesses. Judge Couvillion did and found them credible. It is no

surprise that a knowledgeable tax attorney would use numerous

legal entities to accomplish different objectives. This does not make
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

11

them illegitimate. Unfortunately such “maneuvering”is apparently

encouraged by our present tax laws and code. Judge Couvillion

heard the witnesses and reviewed the exhibits and concluded the

government simply failed to prove such by clear and convincing

evidence. The record fully supports his findings of fact and

conclusions. Accordingly, we remand to the Tax Court with

instructions to vacate Judge Haines’ opinion and enter an order

approving and adopting Judge Couvillion’s original report as the

opinion of the Tax Court. 

Id. at 1254-55. Following our own independent review of the record, we agree

with the conclusion of the Eleventh Circuit in Ballard with respect to taxpayer

Lisle. 

IV.

We will address one additional argument raised by the Commissioner.

The Commissioner faults the Special Trial Judge and the Eleventh Circuit for

glossing over its flow of funds argument, particularly for their conclusion that

once it was determined that no kickbacks occurred in connection with the

transactions,the flow of funds need not be examined. The Commissioner argues

thatthe transactions cannot be properly analyzed without taking the money flow

into account. The Commissioner also argues that the documentary evidence of

the flow of funds supports the Tax Court’s rejection of the Special Trial Judge’s

credibility determinations in favor of the taxpayers. 

As described in Lisle I, 

Kanter established a number of corporations, partnerships, and

trusts allegedly to receive, distribute, and disguise illegal kickbacks

from five business arrangements at issue here. These five

transactions and their principal participants are referred to by the

parties and the Tax Court as "the Five."

Most of the payments in this case initially were made through

Investment Research Associates, Inc. (IRA), which Kanter

incorporated in Delaware.
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

12

Lisle I, 341 F.3d at 370. Kanter controlled IRA. All of the payments from the

Five to IRA were reported on IRA’s federal income tax returns.

[IRA] owned controlling interests in several subsidiary corporations

including Carlco, Inc., TMT, Inc., and BWK, Inc. As we will discuss,

in 1983, IRA distributed all of its assets to Carlco, TMT, and BWK

in a 45-45-10 percent split, which were thereafter managed

respectively by Lisle, Ballard, and Kanter. The government asserts

that forty-five percent of the payments from the Five to Kanter

corporations were distributed to Lisle based on this arrangement.

Id. In sum, the Commissioner proceeded on a theory that the payments

described above from the Kanter controlled corporation, IRA, to a subsidiary,

Carlco, which Lisle managed, were kickbacks that Kanter was paying to Lisle

for influencing action by Prudential.

First, we agree with the Eleventh Circuit that Judge Couvillion did not

clearly err in declining to further analyze the Commissioner’s flow of funds

argument after he determined that no kickbacks occurred and thus Ballard, like

Lisle, had not earned income from kickbacks from the Five transactions. If there

was no kickback scheme that generated income to Lisle, there was no relevant

money flow to follow. Ballard III, 522 F.3d at 1253. 

The fact that Kanter transferred money from IRA to Carlco, which entity

and funds were under the management of Lisle, does not establish that Lisle

earned that money. In Lisle I, we found the “assertion that Lisle was the true

earner of forty-five percent of the payments because he received forty-five

percent of the proceeds, and therefore we will assign forty-five percent of the

proceeds to Lisle because he earned them [to be] circular.” 341 F.3d at 380.

Rather we questioned whether there was any evidence of Lisle actually receiving

any of the payments which the Five made to Kanter, based on the evidence the

government relied on: Lisle’s management of the assets of Carlco, the payment
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

13

of consulting fees to Lisle’s children; and the loans to Lisle and the trusts which

benefitted Lisle’s family. Id. at 381. 

We rejected the argument that Carlco was Lisle’s alter ego. Id. at 378. As

to the payments to Lisle’s children, we found that “there is no evidence of Lisle’s

involvement in authorizing them,” and also questioned whether the payments

to Lisle’s children from the Weaver deal (one of the Five) supported the

Commissioner’s position that Lisle was funneling money to his children.

It is true that Kanter, Ballard, and Lisle could have had an

arrangement to split the funds from the Weaver deal, and

accomplished this by funneling some of the money through KWJ to

Lisle and Ballard's children. Alternatively, it is also possible that

Kanter hired the children of a close family friend who both had some

real estate experience to bring potential real estate investments to

his attention. In fact, one of Lisle's children was otherwise employed

full-time by Kanter. The question is whether the evidence supports

the conclusion that Lisle was funneling money from the Weaver deal

to his children.

When the Weaver transaction is examined closely, the evidence is

far from clear that Lisle and Ballard were receiving kickbacks

laundered through Kanter to their children. First, one must assume

that Ballard and Lisle agreed with Weaver to split the commission,

and that after meeting Kanter, decided to use him to help launder

the money years later. Weaver received a commission from Hyatt for

his help in getting Hyatt the Embarcadero contract in 1970 or 1971.

Ballard and Lisle did not meet Kanter until 1972. The agreement

between Kanter and Weaver for the purchase of the Hyatt

commission payments through the purchase of KWJ corporation

was not reached until 1976, and the purchase did not take place

until 1979. The funds from commission payments were not

disbursed to Carlco, TMT, and BWK until 1983, although small

payments to Lisle's and Ballard's children began in 1982. If Lisle

had agreed to sell his influence to Weaver for a cut of the

commission Weaver received from Hyatt, it is not credible that he

would rely on a deal formulated years later by Kanter, a man he did

not even know at the time he allegedly sold his influence to Weaver.
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

14

And if the commission paid to KWJ belonged to Lisle, Ballard, and

Kanter in a 45-45-10 split, there is no explanation for why KWJ

made payments to the children which were not in proportion to this

split. There may be some overarching rationalization for these

inconsistencies, but we have not discerned it.

Id. at 381-382. Regarding the loans, we noted: 

The government does not explain how these loans can be

characterized as kickbacks when they began before the Five ever

made any payments to Kanter's corporations. In fact, many of the

largest loans to the Ballard and Lisle family trusts occurred before

the first payment by a member of the Five in 1977. Of the $ 220,000

loaned to Lisle and his family's trusts over the sixteen years cited by

the court, $ 68,000 was loaned before 1977. While this does not

mean that later loans were not distributions of income from the

Five, it casts serious doubt on that conclusion.

Id. at 382. We therefore disagree with the Commissioner that the flow of funds

evidence provides such persuasive proof of the existence of a kickback scheme

that Judge Couvillion’s contrary finding must be overturned.

The Eleventh Circuit made a similar finding as to taxpayer Ballard.

We nonetheless note that Judge Haines's thorough treatment ofthe

flow-of-funds argument does not convince us that Judge Couvillion's

finding concerning the scheme was manifestly unreasonable. The

fact that Kanter transferred to TMT, Carlco, and BWK money

received from the Five does not necessarily show that Ballard and

Lisle earned that money. A finding that Ballard was the true earner

of 45% of the payments because his corporation ultimately received

45% of the payments is circular. Likewise, Judge Haines's attack on

Kanter's explanation for the allocation involves leaps of logic.

Although Judge Haines accurately stated that Kanter's reasoning

that Carlco's investment might imperil IRA's deductions did not

apply to TMT or BWK, this does not necessitate a conclusion that

TMT, Carlco, and BWK were the parties' alter egos. Rather, Kanter

may have wished for TMT, Carlco, and BWK to maintain similar tax

status. He was an acknowledged expert in our tax laws. Also,
No. 07-60862 (Consolidated with 07-60683 and 07-60684)

15

although Judge Haines accurately noted that all of the money

allocated per the 45% -45% -10% split was traceable to the Five and

that IRA had other money that was not allocated, this does not

necessitate a finding that the allocation was a method of getting

kickback income to anyone. Rather, Kanter simply may have chosen

one of its sources of income to fund the allocation. In sum, Judge

Haines attributed too much to these facts.

Ballard v. Comm'r, 522 F.3d 1229, 1254 (11th Cir. 2008). The evidence relied

on by the Commissioner and the Tax Court is inadequate to overcome the

presumption of correctness that accompanies the findings of the Special Trial

Judge. 

V. 

For the reasons stated above, we vacate the judgment oftheTax Court and

remand this case to the Tax Court with instructions to enter an order adopting

Judge Couvillion’s original report as the opinion of the Tax Court and to enter

judgment consistent with that report and this opinion. 

VACATED and REMANDED.