- 37 -
case serve as a test case, he did so without condition. He
believed that he would win his case because he had correctly
reported his tax liabilities, as reduced by reason of his
participation in the Kersting programs.
Mr. Seery selected the Hongsermeier case because it was his
impression that the Hongsermeiers had used their own funds to pay
the principal of a Kersting leverage loan, rather than using a
"nontaxable distribution" from a Kersting holding company.22
Mr. Seery also selected the Hongsermeiers because they had
participated in the CAT-FIT program, which Mr. Seery viewed as
the strongest Kersting program from the standpoint of sustaining
the interest deductions claimed.
Mr. McWade analyzed between 400 and 500 project cases; he
selected test cases that he thought would be representative of
all Kersting programs for all years in dispute. Mr. McWade
selected "clean" cases; i.e., cases that did not include issues
other than Kersting interest deductions. Mr. McWade tried to
avoid cases that were unique or atypical of the Kersting
programs. Although Mr. McWade selected at least five of the test
cases, he could not recall the specific cases that he selected.
In June 1986, Mr. McWade and Mr. Seery agreed on the dockets
that were to serve as the test cases. By letter dated June 10,
22 Mr. Seery's impression was not quite right. The Court
found in Dixon II that the Hongsermeiers were unique insofar as
they paid $250 per month out-of-pocket (rather than use the
proceeds from a leverage loan) to satisfy the interest due on
a CAT-FIT primary loan. See Dixon II, 62 T.C.M. (CCH) at 1480,
1991 T.C.M. (RIA), at 91-3023.
Page: Previous 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 NextLast modified: May 25, 2011