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Petitioners argue that we should decide this issue based on
what they contend is the substance of this transaction; i.e., a
loan from HMC to Wise and Eicher, which they closed through WRI,
and that a $2.5 million outlay occurred which increased their
stock bases.
Ordinarily, taxpayers are bound by the form of the
transaction they have chosen; taxpayers may not in hindsight
recast the transaction to obtain tax advantages. Don E. Williams
Co. v. Commissioner, 429 U.S. 569, 579-580 (1977); Commissioner
v. National Alfalfa Dehydrating & Milling Co., 417 U.S. 134, 148-
149 (1974).
The substance of this loan is not different from its form.
The HMC loan to WRI did not lack substance. Petitioners never
made an economic outlay justifying the basis they claimed.
Apparently, HMC and WRI intended that the HMC loan be to the
corporation. The loan has been renewed five times and remained
in the same form, namely payable to HMC by WRI. There was no
default on the loan from 1984 to 1990. WRI made repayments
directly to HMC. There is no evidence that WRI was indebted to
Wise and Eicher for this loan.
Wise's and Eicher's guarantees do not alter the fact that
WRI is the borrower. It is not surprising that a lender to a
small, closely held corporation such as WRI would seek personal
guarantees from its shareholders. See Harris v. United States,
supra at 445. The wholly unperformed guarantees do not meet the
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