Raymond K. and Minerva R. Mason - Page 13

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          seeking an imputed dividend from the Petitioners."  Petitioners             
          misconstrue the manner in which the transaction is viewed under             
          section 7872.  As mentioned above, the statute treats a below-              
          market loan as a transfer from the lender to the borrower of an             
          amount equal to the forgone interest, and a retransfer of such              
          amount from the borrower to the lender as interest.  Sec.                   
          7872(a)(1).  Pursuant to that treatment, petitioners have                   
          received increased itemized deductions for interest to the extent           
          allowed by rules governing such deductions, and forgone interest            
          was included in income by RSI.  It is integral to the statutory             
          scheme that petitioners also recognize the amount of forgone                
          interest as dividend income.                                                
               Finally, it is true that, in 1990, KPMG determined the                 
          correct amount of interest that should have accrued on the debt             
          in order to have avoided the application of section 7872.                   
          However, it is well established that a transaction is to be given           
          effect in accordance with what actually occurred, not with what             
          might have taken place under different circumstances.                       
          Commissioner v. National Alfalfa Dehydrating & Milling Co., 417             
          U.S. 134, 148 (1974).  Taxpayers are bound by the form of the               
          transaction they chose and must accept the tax consequences of              
          their choice.  Id. at 149; Bradley v. United States, 730 F.2d               
          718, 720 (11th Cir. 1984).  Since petitioners structured the                
          loans without stated interest during 1987 and 1988, they may not            






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