- 5 -
Staff of Joint Comm. on Taxation, General Explanation of the
Revenue Provisions of the Deficit Reduction Act of 1984, at 528-
529 (J. Comm. Print 1984).
Section 7872 applies to a transaction that is: (1) A loan;
(2) subject to a "below-market" interest rate; and (3) described
in one of several enumerated categories. Sec. 7872(c)(1),
(e)(1), (f)(8). The parties agree that the third requirement has
been met. We discuss the remaining requirements in turn.
I. Loan Requirement
Respondent contends that each advance petitioner made to the
Tators should be treated as a separate loan. Petitioner contends
that the corporation was authorized to fund both projects with a
single loan and that the advances were analogous to "draw downs"
on an open line of credit. Petitioner further contends that, for
purposes of section 7872, a loan did not exist until petitioner
advanced all the funds necessary to complete the Pittsburgh and
Houston projects. Petitioner relies on section 1.7872-2(a)(1),
Proposed Income Tax Regs., 50 Fed. Reg. 33557 (Aug. 20, 1985),
which states: "An integrated series of transactions which is the
equivalent of a loan is treated as a loan."
While proposed regulations do constitute "'a body of
informed judgment * * * which courts may draw on for guidance'",
Frazee v. Commissioner, 98 T.C. 554, 582 (1992) (quoting Bolton
v. Commissioner, 694 F.2d 556, 560 n.10 (9th Cir. 1982), affg. 77
T.C. 104 (1981)), we accord them no more weight than a litigation
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011