Gideon L. and Corazon P. Medina - Page 9

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          interest.  Respondent contends that the amount involved is the              
          greater of the "interest actually charged" (i.e., the 10.5-                 
          percent stated interest rate) or the fair market interest.                  
          Respondent relies on Thoburn v. Commissioner, 95 T.C. 132, 139              
          (1990), and Janpol v. Commissioner, 101 T.C. 518, 529 (1993), as            
          support for this contention.  In Thoburn, the Court paraphrased             
          the regulations' "amount paid" language as "interest actually               
          charged".  See Thoburn v. Commissioner, supra at 139.  The                  
          Court's statement is dicta.  In Janpol, the Court repeated this             
          statement without discussion or necessity.  See Janpol v.                   
          Commissioner, supra at 529.  In these cases, it is not clear                
          whether "interest actually charged" means interest stated,                  
          billed, or paid.                                                            
               We hold that, in the case of a loan, the "amount involved"             
          is the greater of the interest paid or the fair market value of             
          the use of the loan proceeds.  Our holding and the Treasury                 
          regulations are consistent with the statute's express language.             
          The statute refers to the greater of "money and * * * other                 
          property given" or "money and * * * other property received".               
          See sec. 4975(f)(4).  In the case of a loan, the money "given"              
          and "received" is the interest paid by one party and received by            
          the other.  "Interest actually charged" can be interpreted as the           
          stated or billed interest, and such interest is not, necessarily,           
          "given" or "received".                                                      





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