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to which the “indirect” loans were made in these circumstances.
C also contends that R cannot make determinations
with respect to it without making corresponding
adjustments to the income taxes of its shareholders. R
argues that such adjustments are not a prerequisite to
the making of a determination with respect to one of
the parties to a sec. 7872, I.R.C., below-market-
interest loan.
Held: Sec. 7872(c)(1)(C), I.R.C., applies to C’s
loans to each of its shareholders and to C’s loans to
each of the family-owned entities in which C’s
shareholders held an interest. Held, further: Sec.
7872, I.R.C., requires “consistent” treatment but does
not require that R make both adjustments concurrently
or determine one before determining the other.
Towner Leeper, for petitioner.
Gerald L. Brantley, for respondent.
OPINION
GERBER, Judge: Respondent determined income tax
deficiencies in petitioner’s taxable years ended August 31, 1994
and 1995, in the amounts of $19,094 and $16,944, respectively.
The deficiencies are attributable to respondent’s determination
that petitioner made “below-market loans” within the meaning of
section 7872.1 More particularly, we consider a question of
first impression of whether the provisions of section 7872 apply
1 All section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to
this Court’s Rules of Practice and Procedure, unless otherwise
indicated.
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