the form of

loans, which were never repaid and later written off as

uncollectible.   Respondent variously characterized the operation

as “schemes” by which payments by The Five went figuratively into

a “black box” from which there was a “drop down” to and through

various entities until the moneys reached Ballard, Lisle, and

Kanter.   In actuality, respondent argues, the payments under the

Prudential scheme constituted kickback income to Kanter, Ballard,

and Lisle, which Kanter, Ballard, and Lisle fraudulently failed

to report on their respective income tax returns.

     As the Court understands the case, respondent’s claim of

fraud is not based, per se, on the payments by The Five to Kanter

or any of the other entities to which such payments were

directed.   The record is clear, and respondent does not challenge

thefailure of Kanter, Ballard,

and Lisle to report the Prudential scheme, Travelers transaction,

and Kanter transaction income constituted fraud under section

6653(b), for 1978 through 1989.    The entities that make up The

Five and a brief description of each follows:

     (1) Hyatt Hotels Corp., a subsidiary of Hyatt Corp. (Hyatt).

Hyatt manages hotels in the United States, Canada, and the

Caribbean.    As indicated previously, members of the Pritzker

family control the ownership of Hyatt.       Kanter represented the

Pritzkers for years as their attorney.       In 1979, IRA acquired KWJ

Corp., a corporation that had been receiving certain “commission”

payments from Hyatt on the management fees Hyatt earned in

operating the Hyatt Embarcadero Hotel at San Francisco,

California.  