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questions about how the shareholders or nonshareholders are
individually taxed. Here, we have jurisdiction solely over
whether petitioner, a corporation, is subject to section 7872 and
whether imputed interest arises from the interest-free loans it
made to its shareholders and the related entities.
Petitioner, however, is contending that distortion is caused
by the application of section 7872 to situations where a
corporation makes loans to an entity in which both shareholders
and nonshareholders of the lending corporation have ownership
interests. Petitioner explains that Claud Tharp, who owned no
shares in the lending corporation (petitioner), did own 20
percent of the Tharp Farms Partnership and 25 percent of Tharp
Enterprises Partnership, entities that received most of the
proceeds of the indirect below-market loans. Petitioner’s
argument contains the implication that respondent would be unable
to make dividend income adjustments to all participants in the
entity to which indirect loans are made. Petitioner theorizes
that respondent’s alleged inability should preclude respondent
from determining that the lending corporation had income
attributable to the below-market interest. Petitioner’s position
is somewhat myopic because section 7872 is not limited to
transactions between corporations and shareholders. It may
result in below-market loans being treated in part as gifts,
dividends, contributions of capital, payments of compensation, or
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