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confer an economic benefit * * * to petitioner’s shareholders,
who also owned and controlled the borrowing entities.”9
We agree with respondent that the circumstances in this case
are such as Congress intended would trigger the lender’s
recognition of forgone interest under section 7872(c)(1)(C).
Petitioner would have us focus on the fact that no shareholder of
petitioner individually held a majority of petitioner’s stock
and, as to indirect loans, that persons who were not shareholders
of petitioner owned interests in the entities that received the
below-market loans. Petitioner’s focus, however, overlooks the
fact that all of the shareholders of petitioner were part of the
same family and, of necessity, collectively agreed to make or
permit the making of below-market loans both directly to
themselves and indirectly to their family-controlled entities.
In the same vein, the “indirect borrowing entities” were
exclusively composed of family members, including petitioner’s
shareholders and in some instances the shareholders’ father or
children.
The below-market loans were being made within a tightly
controlled conglomeration of Tharp family members and entities
9 Respondent does not rely on the attribution provisions of
sec. 267 or 318 for his interpretation of the language of sec.
7872. Respondent does, however, ask us to focus on the fact that
petitioner and the entities to which it made loans were all owned
and controlled by persons having a close family relationship. No
ownership interest in any of those entities was held by an
individual outside of the family.
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