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Petitioner also argues that court holdings addressing
“below-market loans” fact patterns, both before and after the
enactment of section 7872, concerned majority or controlling
shareholders. Petitioner concludes that these cases, therefore,
stand for the proposition that without control by a shareholder
there can be no imputed interest. On that point, however,
insofar as it pertains to the loans made directly to petitioner’s
shareholders, the terms of section 7872(c)(1)(C) are clear; i.e.,
it applies to loans “between a corporation and any shareholder”
(emphasis added). Again, there is no ambiguity or room for
interpretation of the statutory language regarding its
application to shareholders who are not controlling or majority
shareholders. It appears, to some extent, that section 7872 was
enacted in response to the cases that petitioner has relied upon
and in which the Commissioner was generally unsuccessful in
pursuing below-market loan situations.
In addition, the pre- and post-enactment opinions, although
they involve controlling shareholder fact patterns, do not
reflect any consideration of a threshold requirement that below-
market loans be made to a majority shareholder.5 Finally,
5 To the contrary, the Commissioner was unsuccessful in the
corporation/shareholder cases for reasons that had no
relationship to the number of shares held by the taxpayer.
Although share ownership may have some relationship to dividend
and constructive dividend situations, that aspect was not focused
upon in the line of cases referenced by petitioner.
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