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the next taxable year when the gold was sold. We earlier
addressed the deductibility of interest arising from these
transactions in Seykota v. Commissioner, T.C. Memo. 1991-234
(Seykota I), supplemented by T.C. Memo. 1991-541 (Seykota II).
In Seykota I, we found that the FTI A/C transactions lacked
economic substance. We therefore disallowed the taxpayers'
claimed deduction of losses incurred as a result of their
participation in that program. We made an exception for the
deduction of interest paid in connection with borrowing funds to
participate in the program. On the Commissioner's motion for
reconsideration, however, we modified that opinion. Citing
Goldstein, Julien, and Sheldon, we held in Seykota II that the
taxpayer could not deduct interest expenses paid to borrow funds
to acquire gold in connection with FTI A/C transactions. Based
on the record before us in Seykota II, the interest payments
appeared to be integral parts of transactions that "Seen as a
whole * * * lacked economic substance or any purpose other than
generating tax deductions". Id. The taxpayers had the burden of
persuading us otherwise, and, when they failed to do so, we
sustained the Commissioner's disallowance of the claimed interest
deductions.
Respondent maintains that the interest deductions at issue
here are factually indistinguishable from those we addressed in
Seykota II. Respondent accordingly concludes that the reasoning
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