- 234 -
loans made by trusts established for the benefit of petitioner's
three daughters. In 1977 petitioner established these six
trusts, two for each of his three daughters. The two trusts for
each daughter were in the amounts of $25,000 and $75,000. Each
of the trusts was for a term of 10 years and 1 day. The three
trustees were Priscilla Meier, petitioner's longtime employee,
and George Hairston and David Johnston, attorneys in the law firm
of George, Greek. The terms of the trust agreements placed
investment discretion solely in the hands of the three trustees
acting in unison and not separately.
In 1977 the 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
trust was lent to petitioner personally with a rate of return of
12 percent per annum. As security for the loans, petitioner gave
mortgages on his residence and condominium. He claimed interest
paid to the trusts in the amounts of $30,000 and $45,000 for the
years 1980 and 1981, respectively. At the end of the years 1980
and 1981, the loans had not been repaid. The funds in the trusts
were paid to petitioner personally or were invested in entities
that he controlled.
Respondent contends that the claimed interest deductions of
$30,000 for 1980 and $45,000 for 1981 should be disallowed
because petitioner should be treated as the "owner" of the
Page: Previous 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 NextLast modified: May 25, 2011