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to the account of E.F. Hutton. The similarity between notations
and deposits verifies that the estate paid to the trusts interest
on loans from the trusts to the estate. The trusts did not earn
interest income on the municipal bonds or mortgages sufficient to
make the $82,764 of payments to E.F. Hutton during 1984. Thus,
the deposits made to E.F. Hutton could not have been made unless
the estate had transferred funds to the trusts. Petitioner has
not offered any contrary explanation to meet his burden.
Accordingly, we find that the estate transferred $82,764 in
interest to the trusts.
Since we find that there were bona fide debts between the
estate and trusts and that the estate paid $82,764 in interest on
these debts, Trust C had interest income for its fiscal year
ended February 28, 1985, in the amount of $24,829, 30 percent of
$82,764. Notwithstanding the fact that the estate lacks DNI for
the subject taxable year, Trust C must include this amount in its
DNI for its 1985 taxable year since the estate paid interest to
Trust C in the latter's capacity as a creditor rather than
beneficiary of the estate. See Kitch v. Commissioner, 104 T.C. 1
(1995).
2. Interest on Mortgages
Income derived from property is generally included in the
gross income of the owner of the property. Helvering v. Horst,
311 U.S. 112 (1940); Blair v. Commissioner, 300 U.S. 5 (1937).
The owner of property is the one who will reap the benefits of
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