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attendant anxieties; this is because they did not have the
foresight or the discipline to invest the chimerical tax savings
they had appropriated by using the Kersting shelters to support
their original return positions.36 On the other hand, there are
a minority of petitioners who, without conceding their
liabilities, have stopped the running of interest against
themselves by prepaying the Kersting deficiencies the IRS had
determined against them.37 With the passage of time and the
operation in their favor of the force of compound interest, this
minority of petitioners are entitled, under the Dixon V opinion
and mandates, to substantial refunds, and properly so.
A further comment: The financial burden of petitioners who
did not prepay has been substantially ameliorated--but not
completely eliminated--by respondent’s concession that no
interest will be charged on deficiencies for the period of the
36The bulk of petitioners in the Kersting project appear to
have been commercial airline pilots. There is no evidence in the
record of their financial sophistication or lack thereof, either
individually or as a group.
37The Court understands that this group includes the
remaining test case petitioners, with the exception of the
Dixons, who received a discharge in bankruptcy. By collecting
the deficiencies from the test case petitioners because of their
failure to file appeal bonds, cf. Estate of Kanter v.
Commissioner, T.C. Memo. 2006-46, respondent has put those
petitioners in the advantageous position of being entitled to
collect substantial refunds, on which interest has been accruing
and compounding over the years without attracting current annual
tax liabilities. Of course, the interest component of those
refunds will be includable in gross income of the recipients when
finally paid.
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