-351-
tax returns. As indicated, respondent determined that THC’s
share of the Shelburne and Century bonus payments represented
Kanter’s income.
This Court, in Durkin v. Commissioner, 87 T.C. 1329 (1986),
affd. 872 F.2d 1271 (7th Cir. 1989), passed upon and made certain
factual conclusions regarding the loan by Delta to Shelburne
under which loan one of the bonus payments in dispute in these
case was made. Under the terms of both loans, Shelburne and
Century, as the debtors, were required not only to pay principal
and interest to Delta and Alpha, but Shelburne and Century were
also required, under certain conditions, to pay Delta and Alpha
certain amounts referred to as bonus payments. These bonus
payments were in fact paid, and both Shelburne and Century
treated these bonus payments as interest and claimed deductions
of such payments for income tax purposes. In Durkin v.
Commissioner, supra, this Court held the Shelburne bonus payment
did not constitute compensation for the use of money and,
therefore, it was not deductible as interest. The Court further
held the bonus payment essentially was nothing more than a
mechanism to divert funds from Shelburne to Delta (and on to CMS
Investors), “thereby increasing the income of the partnerships
and trusts associated with or established for the benefit of the
members of the law firm or their immediate families.” Durkin v.
Commissioner, supra at 1400.
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