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petitioners' 1994, 1995, and 1996 Federal income taxes,
respectively.
All section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure. After concessions,
the issues are whether petitioners: (1) Have interest income,
pursuant to section 7872, from loans made to their controlled
corporation; and (2) are entitled to deduct, on their 1996 tax
return, 1997 real property taxes.
FINDINGS OF FACT
Frederick R. Hoffman died on August 15, 1996, and Marilyn C.
Hoffman was duly appointed executor of his estate. At the time
the petition was filed, Mrs. Hoffman resided in Woodville,
Virginia.
Petitioners were the controlling shareholders of, and
routinely advanced funds to, Hilltop Stud Farm, Inc. (Hilltop).
Petitioners routinely paid Hilltop’s expenses with personal
funds. Corporate and personal records reflected the advances
(including expense payments) as increases in petitioners’
shareholder loan accounts. Petitioners made nine advances in
1994, three in 1995, and four in 1996 (i.e., Hilltop’s fiscal
years ending March 31). Hilltop’s 1994, 1995, and 1996 Federal
income tax returns, signed by Mrs. Hoffman as its president,
reflected “Loans from stockholders” of $2,122,195, $1,613,053,
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