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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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