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that 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, petitioners are not taxable on those
payments.
Petitioners present the testimony of petitioner and of
Timothy Monahan, petitioner's brother and president of both
Chestnut Grove and Group M, and numerous documents to support
their assertion that the Yakima interest payments represent
interest paid to Mr. Bell. In response, respondent essentially
relies on the Aldergrove issue and petitioners' concession that
the funds allegedly loaned to petitioner by Hansa Finance were
previously transferred to Hansa Finance from Aldergrove
(petitioners' concession). Respondent asserts: “Hansa Finance
should be considered a mere `straw man': Aldergrove advanced at
least $200,000 of the money to Hansa before Hansa provided
$310,000 to Petitioner.” Petitioners respond as follows:
When Respondent ominously intones that John
Monahan “acknowledges on cross examination that Hansa
first received the initial land acquisition funds
($200,000) from Aldergrove,” * * * she forgets that
$570,000 of Aldergrove Investments [sic] initial
$579,000 of capital was contributed to Aldergrove by
Bell acting through Grove Management Ltd., the wholly
owned subsidiary of his wholly owned Span Corp., Ltd.
* * *. Lynwood S. Bell shifted those funds from
Aldergrove to Hansa Finance for the purpose of loaning
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