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interest paid to Crown Life. There is no evidence that these
payments were for interest. Thus, they are disallowed.
On September 10, 1979, three members of the Mirhosseini
family each lent petitioner $80,000. Petitioner agreed to invest
a total sum of $240,000 in his operating companies and to provide
the Mirhosseini family with a return on the principal of 25
percent per year, payable quarterly in advance. During
approximately the same time period petitioner borrowed other
funds at interest rates of 8 percent to 12-1/2 percent. He
deducted as interest paid to the Mirhosseini family $15,000 in
1979, $43,879 in 1980, and $36,000 in 1981. However,
petitioner's journals show no payments to the Mirhosseinis in
1979, 1980, and 1981. Therefore, petitioner is not entitled to
any deduction for interest expense for payments to the
Mirhosseini family in 1979, 1980, and 1981.
In 1977 petitioner created six trusts, two for each of his
three daughters. The two trusts for each daughter were funded
with $25,000 and $75,000. Each of the trusts was for a term of
10 years and 1 day. The three trustees of the trusts were
Priscilla Meier, George Hairston, and David Johnston. The terms
of the trust agreements granted the three trustees investment
discretion. In 1977 trust funds were lent to CDC, a corporation
in which petitioner held a controlling interest. The loans were
repaid to the trusts. On February 5, 1980, the corpus of each
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