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During the 8-year period under consideration, petitioner’s
advances to the three sister corporations totaled $1,413,374.17.
During that same period, the three sister corporations repaid
$414,220. Accordingly, approximately 29 percent of the total
amount advanced by petitioner was repaid by the sister
corporations. The repayments were sporadic, not uniform in
amount, and depended upon the ability of the sister corporations
to pay. For example, in 1986 petitioner advanced $151,000 to
First World Corp., and $5,000 was repaid. In the next year
(1987) $184,600 was advanced, and nothing was repaid. In the
following year (1988) $163,025 was advanced, and $57,650 was
repaid. Petitioner continued to advance funds to the sister
corporations in generally increasing amounts even though the
relative amount of repayment and ability to repay were steadily
decreasing.
Petitioner did accrue and report $175,662 as interest income
over the 9-year period, 1984 through 1992. Interest income,
however, was accrued and reported only for one sister corporation
for its 1984 through 1989 years and for another for its 1987 and
1988 years. Accordingly, petitioner accrued and reported
interest income in only 8 of 22 annual accounting periods of the
sister corporations--approximately one-third of the time.
When interest was accrued and reported, it was not uniform
in amount or percentage. As calculated previously, the rate or
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