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Respondent argues alternatively that, if the Court finds the
doctrine of collateral estoppel to be inapplicable, the 1991
interest payments are taxable to petitioners because petitioner
made acquisition and development loans for the Yakima property to
Chestnut Grove and Group M and benefited from and exercised
control over the 1991 interest payments.
3. Relevant Legal Principles
a. Interest Income
Section 61(a)(4) provides that gross income means all income
from whatever source derived, including interest. “Generally,
interest earned on investment is taxable to the person who
controls the principal.” P.R. Farms, Inc. v. Commissioner, 820
F.2d 1084, 1086 (9th Cir. 1987) (citing Helvering v. Horst, 311
U.S. 112, 116-117 (1940)), affg. T.C. Memo. 1984-549.
“`[C]ommand over property or enjoyment of its economic benefits
* * *'”, which is the mark of true ownership, is a question of
fact to be determined from all of the attendant facts and
circumstances. See Hang v. Commissioner, 95 T.C. 74, 80 (1990)
(quoting Anderson v. Commissioner, 164 F.2d 870, 873 (7th Cir.
1947), affg. 5 T.C. 443 (1945)). Mere legal title is not
determinative of beneficial ownership. See Serianni v.
Commissioner, 80 T.C. 1090, 1104 (1983), affd. 765 F.2d 1051
(11th Cir. 1985).
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