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pars. B-1, C-1, and E-2-a, above. Wise made journal entries in
WRI's books and records stating that there had been payment and
simultaneous "loan backs". However, in reality, WRI never parted
with or received back any fees. No notes were issued for the
"loan backs", the "loan backs" were not secured by any
collateral, there was no repayment schedule, and no collection
activity was ever attempted. Thus, for the reasons discussed at
par. E-2-a, above, regarding the Hersco mortgage payment "loan
backs", there was no economic outlay by Wise to WRI, and Wise
cannot increase his basis as a result of his management fee "loan
backs". We agree with respondent on this issue.
3. Intent Loan and Wesco's Loan
In December 1996, Westfield lent $1.1 million to Intent (the
Westfield loan), secured by land Intent owned. Shortly
thereafter, Intent lent to WRI about $797,344 of the proceeds
from the Westfield loan, in exchange for a note from WRI. Wise
and Eicher claimed that their bases in WRI increased by $229,834
and $505,635, respectively, as a result of Intent's loan to WRI.
They also claimed that their bases in WRI increased by $392,276
and $588,413, respectively, as a result of loans Wesco made to
WRI. Respondent contends that neither Wise nor Eicher may
increase his basis in WRI as a result of either Intent's or
Wesco's loans to WRI because none of those loans was a debt of
the S corporation that ran to Wise or Eicher as required by
section 1366(d)(1)(B). Petitioners disagree and argue that both
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