- 24 -
indebted to the shareholder. Harris v. United States, 902 F.2d
439, 441-446 (5th Cir. 1990); Estate of Leavitt v. Commissioner,
875 F.2d 420, 422-426 (4th Cir. 1989), affg. 90 T.C. 206, 211-218
(1988); Brown v. Commissioner, 706 F.2d 755, 756 (6th Cir. 1983),
affg. T.C. Memo. 1981-608; Underwood v. Commissioner, 535 F.2d
309, 312 (5th Cir. 1976), affg. 63 T.C. 468 (1975); Hitchins v.
Commissioner, 103 T.C. 711, 715 (1994); Perry v. Commissioner, 47
T.C. 159, 163-164 (1966), affd. 392 F.2d 458 (8th Cir. 1968).
Petitioners contend that this case is controlled by Selfe v.
United States, 778 F.2d 769 (11th Cir. 1985). In Selfe, the U.S.
Court of Appeals for the Eleventh Circuit indicated that the
shareholder's guarantee of an S corporation loan could increase
the shareholder's basis even though the shareholder had not
satisfied any of the obligation. Id. at 774. The court remanded
the case to the District Court for it to decide whether the loan
in question was in substance a loan to the shareholder rather
than to the corporation. Id. at 775. In Selfe, the taxpayer
started a business and obtained a loan which was secured by her
own property. The taxpayer later incorporated the business under
subchapter S and converted the loan into a corporate obligation,
which she guaranteed and which continued to be secured by her
property. Id. at 770. This case is distinguishable on its facts
from Selfe because HMC made the original loan to WRI, not to Wise
or Eicher, and neither Wise nor Eicher pledged their own property
as security for the loan.
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011