Alan B. Karme and Laila M. Karme v. Commissioner of Internal Revenue

SCHROEDER, Circuit Judge:

This is an appeal from a decision of the tax court that a $60,000 payment by the Appellants, Alan B. and Laila M. Karme, was not deductible under I.R.C. § 163, 26 U.S.C. § 163, as interest paid on an indebtedness because there was no genuine indebtedness. The transactions out of which the claimed interest deduction arose involved the movement of funds through a number of domestic and foreign corporations whose operations had come under scrutiny by the IRS in a series of investigations known as the “Bahamas Project.” 1 We affirm.

I. Discriminatory Investigation

The…