                                                                         F I L E D
                                                                  United States Court of Appeals
                                                                          Tenth Circuit
                    UNITED STATES COURT OF APPEALS
                                                                          MAR 29 2001
                                 TENTH CIRCUIT
                                                                     PATRICK FISHER
                                                                                Clerk

 ROUNTREE COTTON CO., INC.,

               Petitioner - Appellant,

          v.                                            No. 00-9009
                                                    (T.C. No. 24014-97)
 COMMISSIONER OF INTERNAL                             (U.S. Tax Court)
 REVENUE,

               Respondent - Appellee.


                           ORDER AND JUDGMENT           *




Before TACHA , Chief Judge, LUCERO , Circuit Judge, and       BROWN , ^ District
Judge.


      Appellant appeals the tax court’s order dismissing its petition for a

redetermination of its tax liability for the years 1994 and 1995. We exercise

jurisdiction pursuant to 26 U.S.C. § 7482 and affirm.




      *
       This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

      Honorable Wesley E. Brown, Senior District Judge for the District of
      ^

Kansas, sitting by designation.
                                           I.

      The appellant taxpayer made interest-free loans to a variety of other entities

in which the shareholders of the taxpayer owned an interest. During an audit, the

Commissioner determined that the interest foregone on the interest-free loans

should be imputed to the taxpayer pursuant to I.R.C. § 7872. Accordingly, he

increased the taxpayer’s income for the taxable years of 1994 and 1995, which

resulted in tax deficiencies for those years. The taxpayer petitioned the tax court

for a redetermination of its tax liability for the years in question. The tax court

ruled in favor of the Commissioner and this appeal followed.

                                          II.

      This case was decided on stipulated facts. We review a tax court’s

conclusions of law de novo.   St. Charles Inv. Co. v. C.I.R. , 232 F.3d 773, 775

(10th Cir. 2000).

      The taxpayer made several arguments to the tax court in support of its

general contention that the interest-free loans it made are not subject to the

imputation rules of § 7872. The imputation rules apply to any “below-market

loan directly or indirectly between a corporation and any shareholder of such

corporation.” I.R.C. § 7872(c)(1)(C). The taxpayer argued that § 7872 applies

only to loans by a corporation to its majority shareholder or to loans by a

corporation to an entity in which one of the lending corporation’s shareholders


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owns a majority interest. As none of the recipients of the loans in question in this

case are majority shareholders of the taxpayer, nor are any of the recipients

entities of which a majority shareholder is also a shareholder of the taxpayer, the

taxpayer argued that § 7872 cannot apply to the loans at issue. Applying

traditional rules of statutory construction, the tax court held that the language of

§ 7872 was broad enough to encompass the facts of this case and ruled in favor of

the Commissioner.

      For substantially the same reasons given by the tax court, we agree that the

interest-free loans made by the taxpayer are subject to the imputation rules of

§ 7872. Accordingly, the district court’s order of dismissal is AFFIRMED.


                                               ENTERED PER CURIAM




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