United States Court of Appeals, Ninth Circuit

Name: Erhard v. C.I.R. Nos. 93-70357, 93-70359 and 93-70360. (1995)
Author: United States Court of Appeals, Ninth Circuit

Erhard v. C.I.R. Nos. 93-70357…

Summary

“Erhard v. C.I.R. Nos. 93-70357, 93-70359 and 93-70360. (1995)”, is a work by United States Court of Appeals, Ninth Circuit. It explores elements such as Erhard, Margolis and loan.

Quotes from Erhard v. C.I.R. Nos. 93-70357… (United States Court of Appeals, Ninth Circuit)

United States Court of Appeals, Ninth Circuit, Erhard v. C.I.R. Nos. 93-70357…

“ A computation under Rule 155 must be made solely from the evidence in the record and the opinion of the tax court; it cannot be used to reopen the evidence or raise a new issue. Tax Court Rule 155 (c) . See also Paccar, Inc. v. Commissioner, 849 F.2d 393, 399-400 (9th Cir.1988) . Here, the tax court found that Erhard's computation was an accounting opinion that raised a new issue of fact. Erhard disagrees, contending that, because the record already included est, a.e.c. tax returns, the remaining useful lives could be calculated "by simple mathematical computations from those returns." ”

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Source: Wikisource

United States Court of Appeals, Ninth Circuit, Erhard v. C.I.R. Nos. 93-70357…

“ Margolis created the amazingly complicated est, a.e.c. organizational structure, with its numerous offshore entities, in order that money could be "paid offshore in a deductible fashion, and then the money would find its way onshore in a non-income fashion." Reporter's Transcript, volume 22 at 102. Though nominally just an employee of est, a.e.c., Erhard was understood to be its owner. So, when Erhard decided to transform est, a.e.c. into a sole proprietorship, the assets that were ostensibly the property of est, a.e.c. ”

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Source: Wikisource

United States Court of Appeals, Ninth Circuit, Erhard v. C.I.R. Nos. 93-70357…

“ A client earned interest on positive balances in the system accounting and was charged interest on negative balances. Transactions between system entities were not recorded because the funds stayed in the system. Though Erhard purportedly had no ownership interest in est, a.e.c., Margolis maintained only one combined system accounting for Erhard and est, a.e.c.
The tax court found that Margolis' representation of clients generally consisted of three phases. During the initial phase, the client's goals were defined and documents were drafted to realize the goals. ”

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Source: Wikisource

United States Court of Appeals, Ninth Circuit, Erhard v. C.I.R. Nos. 93-70357…

“ WEA immediately transferred $4,950,677 back to various system entities, allegedly in payment for assets. However, out of the aggregate loan *1474 proceeds of $7,200,000, Erhard retained $2,249,323 for operating expenses.
FN2. A back-to-back loan occurs when a bank loan is collateralized with a cash deposit from a third party. When the loan principal is repaid, then the compensating deposit is released. In the Margolis' system accounting, a system entity's deposit securing a back-to-back loan was treated as a charge against the client receiving the loan from the bank. ”

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Source: Wikisource

United States Court of Appeals, Ninth Circuit, Erhard v. C.I.R. Nos. 93-70357…

“ WEA also needed funds for the acquisition. As for the funds, Margolis indicated that, " [t] he truth is that there is no source other than the accumulated values of the past decade." Id. at 12. The asset acquisition was accomplished in four phases. In the first phase, which occurred in June and July 1981, Erhard borrowed $2,200,000 from Terla, B.V., a system entity and $5,000,000 from Barclays Bank of San Francisco. Barclays Bank was not a system entity, but the loan was a back-to-back loan secured by Parallax Corp., a system entity. ”

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Source: Wikisource

United States Court of Appeals, Ninth Circuit, Erhard v. C.I.R. Nos. 93-70357…

“ Given this evidence, the fact that Erhard made some subsequent payments to ICF does not lead to the conclusion that the tax court committed clear error in its finding of sham. Indeed, these payments to ICF can be explained in any number of ways [FN10] that are wholly in keeping with the tax court's conclusion that the transactions lacked economic substance. FN10. For example, the payments could very well have been rendered as a part of the final accounting between Erhard and the system. ”

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Source: Wikisource

United States Court of Appeals, Ninth Circuit, Erhard v. C.I.R. Nos. 93-70357…

“ Phase four took place in December 1981, ostensibly because Erhard needed more money to complete the asset acquisition. This phase was financed with a $1 million demand loan again from ICF through St. John. The source of the funds was Antigua Banking, Ltd., and ABC Trust Company, both system entities. Over a four-month period, Antigua and ABC funneled the funds to the Harry E. Wright, Jr. Charitable Trust, a Margolis client. On August 27, 1981, the Trust transferred $750,000 to Island Bank. On December 17, 1981, the Trust transferred $250,000 to Island Bank. ”

United States Court of Appeals, Ninth Circuit

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