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Generally, in order to qualify as "indebtedness" under
section 1366(d), the indebtedness of the S corporation to the
shareholder must have arisen as a result of an actual economic
outlay by the shareholder. Harris v. United States, 902 F.2d
439, 443 (5th Cir. 1990); Estate of Leavitt v. Commissioner, 875
F.2d 420 (4th Cir. 1989), affg. 90 T.C. 206 (1988); Selfe v.
United States, 778 F.2d 769, 772 (11th Cir. 1985). This Court
has consistently held that no form of indirect borrowing, be it
guaranty, surety, accommodation, or otherwise, gives rise to
indebtedness from an S corporation to the shareholders unless and
until the shareholders pay part or all of the indebtedness.
Estate of Leavitt v. Commissioner, 90 T.C. at 216; Raynor v.
Commissioner, 50 T.C. 762, 770-771 (1968). Prior to such
payment, "liability" of the shareholders to a third party may
exist, but not debt of the corporation to the shareholders.
Raynor v. Commissioner, supra at 771.
The precise question before us is whether Mr. Salem and Mrs.
Saxon made an economic outlay by signing as comakers of the notes
payable to the bank. Petitioners rely chiefly upon the opinion
of the U.S. Court of Appeals for the Eleventh Circuit in Selfe v.
United States, supra. We are bound under the Golsen rule to
follow the opinion of the Eleventh Circuit because an appeal in
this case would be made to that court. Golsen v. Commissioner,
54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir. 1971).
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