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interest deduction, because a portion of the loan proceeds was
"specifically earmarked" for the purpose of paying the interest
due. The Court of Appeals stated that "The fact that the loan
proceeds were run through the taxpayers' bank account in a
transaction intended to take not more than one business day, does
not affect the substance of the transaction." Wilkerson v.
Commissioner, supra at 983. Moreover, the Court of Appeals
explained that "A careful reading of Burgess v. Commissioner, 8
T.C. 47 (1947), indicates that it involved two separate loan
transactions in which the proceeds of the second loan were not
earmarked for the purpose of payment of interest on the first
loan." Id.
Shortly after the reversal in Wilkerson v. Commissioner,
supra, we acknowledged the confusion in this area brought about
by the disparity of results among cases of similar economic
impact. Menz v. Commissioner, 80 T.C. at 1187. In Menz, we
summarized this Court's previous application of the "unrestricted
control" test as follows:
Where a lender gives up control of borrowed funds, the
funds are commingled with the taxpayer's other funds in
an account at an institution separate from the lender,
and the interest obligation is satisfied with funds
from that separate account, there has been a payment of
interest under section 163(a). * * * [Id. at 1187;
citations omitted.17]
17Despite this test for determining "unrestricted control",
consideration of the borrower's purpose for acquiring the
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