- 74 -
Respondent does not dispute that Kersting insisted on
these interest payments, but maintains that to the
extent they were made they must be characterized as
fees to Kersting for providing tax deductions.
Consequently, that Carl Mott allegedly failed to pay
interest on leverage notes is of no significance to the
substance of his or anybody else's leverage loans.
* * * * * * *
As illustrated by Kersting's pay-or-else letter
to over 30 clients on September 25, 1980, and his 1986
correspondence with the Thompsons, his overriding
concern was to be compensated by means of leverage loan
interest. It was this amount that even he often
referred to as a "fee" or a deductible "cost" of tax
deductions. In encouraging clients by means of the
September 25, 1980, letter to "discharge the debt to
which you are a party," he sought only small amounts
that could not have represented typical primary or
leverage loans. His letters to the Thompsons indicate
that he only threatened or pursued collection of
principal obligations when the investor neglected or
refused to pay leverage loan interest. This rare
occurrence, which Kersting did not testify he either
intended or expected, is not sufficient to transform
any of petitioners' loans from Kersting corporations
into genuine recourse indebtedness.
Dixon II, 62 T.C.M. (CCH) at 1505-1506, 1991 T.C.M. (RIA), at 91-
3049 to 91-3050.
VI. Settlements
A. Internal Revenue Service Policy
1. National Office Position
After a tax shelter project is created and a project
attorney and a project Appeals officer are appointed, an official
project settlement offer is determined by the project Appeals
officer, the project attorney, and District Counsel. The project
attorney and project Appeals officer review the strengths and
weaknesses of the particular tax shelter and evaluate the hazards
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