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T.C. Memo. 1989-72. It was not unusual for interest rates during
the period under consideration to be in the 20 to 24 percent
range. See, e.g., Goldstein v. Commissioner, 89 T.C. 535, 548
(1987); Bruce v. Martin, 845 F. Supp. 146 (S.D.N.Y 1994); In re
Presque Isle Apartments, L.P., 118 Bankr. 332 (Bankr. W.D. Pa.
1990). A third-party creditor would not have advanced funds to
the sister corporations at a preferred rate (less than 10
percent), considering the fact that they were startup companies
without a business performance record, assets, security,
guaranties, etc. If we assume a 10-percent rate, the total
interest accruable would have been almost $550,000. At 15
percent, the interest accruable would have approached $825,000.5
If we assumed a 10-percent annual rate of compound interest, the
accrual for the cumulative advances for all 22 accounting periods
would have been an amount approaching $600,000. Accordingly, in
perspective, petitioner accrued and/or reported only a small
percentage of the amount of interest that would have been due to
an unrelated creditor during the years under consideration.
Petitioner’s accountant/tax adviser recommended that
interest be accrued and reported for all years. We do not know
why petitioner did not take that advice. Petitioner has not
provided any explanation as to why it failed to accrue or report
5 All of the above calculations are, for the most part,
based on simple interest. The cumulative balances on Exhibit 21-
U have been increased for accrued interest in only 8 of 22
possible annual periods.
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