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amounts of $3,143 and $3,416 for petitioner’s fiscal tax years
ended August 31, 1994 and 1995, respectively.
The following interest-free loans, evidenced by promissory
notes, were made by petitioner to entities that were, in some
part, owned by petitioner’s shareholders:
Demand Note
Borrower Dated Amount
Buena Vista Partnership Aug. 31, 1994 $27,575.14
Dona Ana Land Corp. Aug. 31, 1994 50,412.27
Tharp Family Partnership Aug. 31, 1994 2,599.12
Tharp Farms Partnership Aug. 31, 1994 581,889.39
Tharp Enterprises--Farms1 Aug. 31, 1994 401,855.24
Tharp Enterprises--Equipment1 Aug. 31, 1994 16,200.00
1 It appears that these two loans were both made to Tharp
Enterprises Partnership and that the “Farms” and “Equipment”
designations reflected the bank accounts into which they were to
be deposited.
During the taxable years under consideration, an additional
$111,707.20 interest-free loan was extended by petitioner to
Tharp Enterprises Partnership that was not evidenced by a
promissory note.
Respondent’s agent computed interest at the “applicable
federal rate” on the indirect loans (not directly to
shareholders) in the aggregate amounts of $45,816 and $46,447 for
the fiscal tax years ended August 31, 1994, 1995, respectively.
The total amounts of imputed interest determined by respondent
for petitioner’s 1994 and 1995 fiscal years were $48,959 and
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