Herbert C. Elliot - Page 9

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          ample support for this finding.  In support of his assertion that           
          the Bank lent the funds to him, petitioner focuses primarily on             
          Petitioner's Note and asserts that this note establishes that he            
          was primarily liable for the repayment of the Loan.  We disagree.           
          We read Petitioner's Note to be nothing more than another form of           
          security required by the Bank as a precondition to making the               
          $500,000 loan to EPC.  In addition to the fact that Petitioner's            
          Note stated specifically that it did not create a separate                  
          indebtedness, we read Petitioner's Note as well as every other              
          document connected with the Loan to state clearly that EPC was              
          the debtor and that petitioner was a guarantor.  Nor do we find             
          anything in the record to persuade us that petitioner and EPC had           
          a debtor/creditor relationship during the relevant year.  As a              
          point of fact, EPC's 1982 and 1983 Form 1120, U.S. Corporation              
          Income Tax Return, stated explicitly that neither EPC nor                   
          petitioner owed the other anything during the period from                   
          September 1, 1982, through August 31, 1984.  We conclude, as we             
          have found, that the Bank made the Loan to EPC, and that                    
          petitioner guaranteed the Loan.                                             
               With this conclusion in mind, we turn to the income tax                
          consequences that flow from petitioner's position as a guarantor.           
          A guarantor may deduct a debt that he or she guaranteed when the            
          guarantor's liability for the debt is certain and he or she                 
          actually pays it.  See Helvering v. Price, 309 U.S. 409 (1940);             
          Eckert v. Burnet, 283 U.S. 140 (1931).  If the guarantor                    




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