Opinion ID: 782888
Heading Depth: 4
Heading Rank: 2

Heading: Sale of Cashmere stock to Waco

Text: 112 On July 12, 1983, in the next stage of the transfers to Zell-controlled entities, Kanter directed the grantor trusts to sell their common and preferred stock in Cashmere to Waco Capital Corp. in return for promissory installment notes totaling approximately $1.5 million. The grantor trusts reported the income from this sale under the installment method of 26 U.S.C. § 453. 113 Waco was a Delaware corporation whose sole shareholder was BRT. BRT's beneficiaries were the members of Kanter's family, who were also the beneficiaries of the grantor trusts. The Tax Court found that, under 26 U.S.C. § 453(f), Waco and the grantor trusts were related persons. See 26 U.S.C. § 318(a)(2), (3). 114 On August 31, 1983, the promissory notes held by Cashmere were paid off by eight checks drawn on the Administration Co.'s Special E account. As noted, the Special E account contained the commingled funds of a variety of entities, mostly (if not entirely) Kanter entities, and the Administration Co. accounted internally for the specific source of a given disbursement. The Administration Co.'s general ledger, however, did not specify the source of the eight checks paying the notes. The checks themselves indicate, in part, what entity is the payor of the notes. Three of the promissory notes were ostensibly paid with funds from BRT, an entity that was not the maker of the notes in question, and there was no documentary evidence that BRT was advancing the funds to the makers of the promissory notes or had, in some way, assumed the obligations on the notes. IRA, 78 T.C.M. (CCH) at 1110-11. 115 As of September 1, Waco held all of the stock in Cashmere, and Cashmere's assets included the real estate partnership interests and $498,500 in cash (from the note payments).