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Although our task has been made onerous by the magnitude of
the record of the original trial and the evidentiary hearing, the
task has been facilitated by the Court's detailed and
discriminating findings of fact and discussion of law in Dixon
II, as required by section 7459(a). We are not confronted by the
opacity of a jury general verdict or cursory findings by a trial
judge sitting without a jury. See Traynor, supra at 22-25. We
reject Mr. Sticht's assertions that we are engaging in sheer
speculation or embarking on uncharted waters in proceeding with
the reversible error versus harmless error analysis mandated by
the Court of Appeals. The road map provided by the Court's
findings and opinion in Dixon II could not be more detailed and
specific in relation to the record of the trial and the
evidentiary hearing.
We therefore will first review the Court's Dixon II opinion
and then consider the relative importance of the testimony and
evidence of Messrs. Thompson, Cravens, and Alexander to the
Court's holdings in Dixon II.
A. Review of Dixon II
The Court's opinion in Dixon II contains a detailed
description of the various Kersting programs and a comprehensive
analysis in support of the Court's determination to sustain
respondent's disallowances of Kersting interest deductions. In
Dixon II, the Court held that the Kersting loans were sham
transactions lacking economic substance, that the loans did not
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