John M. and Rita K. Monahan - Page 6

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               C.  Analysis                                                           
                    1.  Issue                                                         
               The issue is whether the interest payments that were                   
          credited to the Aldergrove account in the amounts of $116,000,              
          $84,700, and $140.66 (the 1991 interest payments), are taxable to           
          petitioners (the 1991 interest issue).                                      



                    2.  Arguments of the Parties                                      
               Petitioners argue that Mr. Bell and his wholly owned                   
          corporations provided the financing that allowed Chestnut Grove             
          and Group M to acquire the Yakima property.  Petitioners argue              
          that the checks in the amounts of $116,000 and $84,700, both made           
          payable to Ihatsu Fudosan or Aldergrove (the Yakima interest                
          payments), represent interest payments to Mr. Bell for the Yakima           
          property loans and were held in trust for Mr. Bell by Aldergrove            
          until those funds were transferred to a Bank of Bermuda account             
          over which petitioner did not exercise any control, and,                    
          therefore, Mr. Bell is taxable on those payments, “regardless of            
          whether Aldergrove Investments Co. was Petitioner's alter ego.”             
               Alternatively, petitioners argue that petitioner lacked                
          sufficient dominion and control over the Aldergrove account to be           
          taxable on the 1991 interest payments.  Petitioners argue that              








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