- 22 -
Petitioner contends that, when made, the loan was a prudent
investment. In support of its contention, petitioner asserts
that the primary purpose of the loan--to obtain an above-market
return on the investment, with minimal risk--was a proper purpose
and that in making the loan there was no incidental benefit to
petitioner or Mr. Shedd. Petitioner contends further that Mr.
Shedd was qualified to evaluate the loan and that, for that
purpose, he used criteria he had used as a commercial real estate
loan officer. Accordingly, petitioner asserts, before the plan
made the loan to Estes Co., Mr. Shedd considered alternative
investments, the relative safety of the loan, the prior loan
history of Estes Co. and the plan, and the demand feature of the
note. Petitioner contends further that, in determining that the
loan was an imprudent investment, respondent focused solely on
the ultimate result of the investment and not on Mr. Shedd's
conduct in deciding to have the plan lend money to Estes Co.
Petitioner also maintains that the loan satisfied the factors set
7(...continued)
Nonetheless, where appropriate, we may adopt the reasoning on
which the revenue ruling is based. Estate of Lang v.
Commissioner, 64 T.C. 404, 406-407 (1975), affd. in part and
revd. in part 613 F.2d 770 (9th Cir. 1980). Moreover, the Court
of Appeals for the Ninth Circuit, to which an appeal in the
instant case would lie, has indicated that it would "give added
weight to an established revenue ruling that fell 'within
* * *[the Commissioner's] authority to implement the
congressional mandate in some reasonable manner.'" Estate of
Lang v. Commissioner, 613 F.2d at 776 (quoting Gino v.
Commissioner, 538 F.2d 833, 835 (9th Cir. 1976)); see also
Propstra v. United States, supra.
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