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Judge Goffe found additional support for his conclusion that
the primary loans did not constitute genuine debt in
Mr. Kersting's backdating of documents relevant to the loan
transactions and the apparent waltz of primary loan funds under
the stock purchase plan and the leasing corporation plan. See
id. at 1500-1502, 1991 T.C.M. (RIA), at 91-3044 to 91-3046.
Judge Goffe held in the alternative that, even assuming that
the primary loans represented genuine debt, the test case
petitioners had failed to show that they actually "paid" interest
on the primary loans within the meaning of section 163(a)
inasmuch as Mr. Kersting apparently waltzed leverage loan funds
that were used to pay interest on primary loans. See id. at
1502, 1991 T.C.M. (RIA), at 91-3046.
iii. Leverage Loans
Judge Goffe determined that leverage loans did not represent
genuine debt because of several factors, including the waltzing
of funds, backdating of documents, substance not following form,
and mutual expectations that program participants would not incur
personal liability for the principal amounts of the leverage
loans. See id. at 1502-1503, 1991 T.C.M. (RIA), at 91-3046 to
91-3047.
4. Collection Litigation
As previously discussed, Mr. Izen offered evidence on behalf
of test case petitioners that various Kersting corporations
initiated collection actions against Kersting program
participants in an attempt to rebut respondent's evidence that
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