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Petitioner was a promoter and manager of investment plans
designed to create interest deductions for plan participants.1
Petitioner has not filed a tax return since 1975. In January
1981, special agents of the Internal Revenue Service (IRS),
Criminal Investigation Division, executed a warrant to search
petitioner's corporate offices. Among the documents seized were
lists of participants in the tax shelter programs. Audits of
these participants resulted in the filing in this Court of
approximately 1,800 petitions. In 1989, 14 dockets involving
eight petitioners with similar adjustments were selected as test
cases, consolidated for purposes of trial, briefing, and opinion,
and set for trial under the name Dixon v. Commissioner. The
issue in Dixon was whether the interest deductions generated by
the Kersting investment plans were allowable.
While the Dixon taxpayers were awaiting trial, the IRS on
May 15, 1987, petitioned the U. S. District Court for the
District of Hawaii (District Court) for leave to serve a John Doe
summons on petitioner. In its petition, the IRS alleged that
petitioner was promoting tax shelters of questionable validity
1 See Dixon v. Commissioner, T.C. Memo. 1991-614, vacated
and remanded sub nom. DuFresne v. Commissioner, 26 F.3d 105 (9th
Cir. 1994), reinstated sub. nom. Dixon v. Commissioner, T.C.
Memo. 1999-101, for a detailed analysis of petitioner's
investment operations.
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