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on petitioners’ 1996 and 1997 Forms 1040, petitioners
substantiated only $519,135 in mortgage interest paid in
connection with the development of the Atherton properties.”
Petitioners claim, however, that they incurred interest expenses
in excess of that amount. Petitioners account for the interest
reserves which were set up as part of the construction and other
loans. However, they suggest that those interest reserves
covered only a portion of their interest expenses. Petitioners
contend that they paid interest at rates equal to the Federal
guidance rates or “G” rates.19 They use those rates to estimate
the interest that they purportedly paid on the loans.20
Even if we were to assume that the “Pacific Bank Guidance
Rate” is the same as the “G” rate, we cannot take the next step
and assume that petitioners paid interest at those rates. There
is no direct evidence that petitioners paid any interest in
excess of those amounts which Pacific collected from interest
reserves in the loans.
19On Feb. 25, 2002, petitioners filed a request for judicial
notice of the Federal guidance rates (“G” rates) applicable to
the period Dec. 1, 1988, through Jan. 23, 1992, as published by
the Federal Reserve Board. We take judicial notice of the “G”
rates as published.
20The Pacific loan documents cite a variable interest rate
determined under “The Pacific Bank Guidance Rate”. Petitioners
assume that this guidance rate provides for the same interest
rates for the relevant period as the “G” rates. On the record
before us, petitioners have not established that this guidance
rate is the same as the “G” rates for the applicable period.
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