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Petitioner had no employees for the activity other than
those employed in the IDS Tower office. He included the wages or
compensation for those employees as part of his general office
overhead. None of those expenses were reflected on his personal
tax returns or on the Schedules C. Petitioner did not engage, on
any consistent basis, in the type of formal activities that one
might associate with a lending and financing trade or business.
It would have been impossible to perceive his lending and
financing activities as a trade or business separate from his
personal or his companies’ affairs.
Moreover, the testimony of Ms. Posthumus and the testimony
of petitioner indicate that petitioner maintained none of the
records that would show the profits actually earned or which
might be expected to be earned on loans from petitioner to his
companies. To that extent, respondent describes petitioner’s
records as “anemic”, and he contends that petitioner “had no
means of determining whether he was re-loaning borrowed funds at
positive, or profitable, interest rate spreads or at negative, or
unprofitable, interest rate spreads.” Given the record before
us, we agree with respondent.
Petitioner contends that the most important test in
determining whether he is engaged in the trade or business of
making loans and guaranties is “the extent of the activity”;
i.e., the number of loans and guaranties and the respective
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