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his various companies so that he might receive the benefit of the
ordinary loss deductions. Mr. Oren followed the advice of the
tax advisers and entered into a series of lending transactions
for the purpose of increasing basis in HL.3
On December 22, 1993, Dart lent $4 million to Mr. Oren. Mr.
Oren executed a note which provided that principal was due 375
days following demand. Interest accrued at a 7-percent annual
rate and was due on December 22, 1994, and on the same day of
each year thereafter. The proceeds of the loan were distributed
in the form of a check (#133680) from Dart to Mr. Oren drawn on
Dart’s account with First Bank Havre (Havre).4
On December 22, 1993, Mr. Oren lent $4 million to HL. HL
executed a note which provided that principal was due 375 days
following demand. Interest accrued at a 7-percent annual rate
and was due on December 22, 1994, and on the same day of each
year thereafter. The proceeds of the loan were distributed in
the form of a check (#2720) from Mr. Oren to HL drawn on Mr.
Oren’s account with Fidelity Investments (Fidelity).
3Even though Mr. Oren ultimately chose to use funds lent by
Dart to finance his investments in HL, Mr. Oren testified that he
had the personal resources to finance the investments without
borrowing from Dart.
4Mr. Oren testified that Dart had a zero balance account
(ZBA). With respect to a ZBA, each time that Dart wrote a check,
it would be drawing on its line of credit with the bank.
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