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debt for tax purposes. See, e.g., Bryant v. Commissioner, 790
F.2d 1463, 1466 (9th Cir. 1986), affg. Webber v. Commissioner,
T.C. Memo. 1983-633; Odend'hal v. Commissioner, 80 T.C. 588, 604
(1983), affd. and remanded 748 F.2d 908 (4th Cir. 1984); Lemmen
v. Commissioner, 77 T.C. 1326, 1348 (1981); Roe v. Commissioner,
T.C. Memo. 1986-510, affd. without published opinion sub nom.
Sincleair v. Commissioner, 841 F.2d 394 (5th Cir. 1988).
In the presence of such peculiar circumstances, we examine
the substance of the debt and are not guided solely by its form.
Waddell v. Commissioner, supra. We have therefore often refused
to give effect to notes that appear on their face to be recourse
notes, but that were unlikely ever to be enforced because of
surrounding circumstances. See, e.g., Waddell v. Commissioner,
supra; Helba v. Commissioner, 87 T.C. at 1009-1011; Houchins v.
Commissioner, 79 T.C. 570, 599-603 (1982).39
The Pettisanis have claimed deductions for interest
allegedly paid on their long-term recourse notes to Machise, made
pursuant to their investment in the MIT 82 tax shelter. In years
after 1982, Machise allegedly repaid the so-called advances from
MIT 82 by circling a note back through the partnership. This
note was then deemed distributed to the partners and then applied
39Other instances in which we have refused to give effect to
allegedly recourse notes in similar tax-shelter situations occur,
for example, in Fritz v. Commissioner, T.C. Memo. 1991-176;
Maultsby v. Commissioner, T.C. Memo. 1989-659; Diego Investors-IV
v. Commissioner, T.C. Memo. 1989-630.
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