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In Menz, we found that the taxpayer had not received unrestricted
control over the funds borrowed for the purpose of paying
interest. We based this conclusion on the following facts: (1)
The loan to the borrower, the deposit into the borrower's
checking account, and the retransfer of the funds to the lender
were all simultaneous; (2) the remaining funds in the borrower's
account with which it could have paid the interest in question
were de minimis; (3) the loans were made solely for the purpose
of paying the interest owed to the lender; (4) the borrowed funds
were easily traceable through the borrower's account to the
asserted interest payments; and (5) a wholly owned subsidiary of
the lender was a 1-percent general partner of the borrower and
possessed approval power over all the borrower's major
transactions. The fifth factor is the only one that was not
present in Wilkerson.
The 1-percent partner did not have signatory authority over
the bank account into which the borrowed funds were deposited.
Menz v. Commissioner, supra at 1190. Nevertheless, we found that
the borrower lacked "unrestricted control", because the 1-percent
general partner of the borrower was controlled by the lender and
could have terminated the borrower's existence if it had failed
to use the borrowed funds to satisfy interest obligations owed to
17(...continued)
additional funds was never completely disregarded. See Menz v.
Commissioner, 80 T.C. 1174, 1187 n.16 (1983).
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