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remanded for a determination of whether or not the lender looked
primarily to the taxpayer for repayment.
We find that the facts in this case are substantially
different from those in the Selfe case. In Selfe, the lender
originally extended a credit line to the taxpayer in
consideration of her pledge of 4,500 shares of stock in a
corporation. When her business was later incorporated in a new
corporation, the lender converted the loans made on the existing
credit line to corporate loans, accompanied by the taxpayer's
agreement guaranteeing the corporation's indebtedness to the
bank. By contrast, in this case, the bank originally made the
loans to the corporation. Although Mr. Salem and Mrs. Saxon
guaranteed the loans, they never pledged any personal property to
secure the debt.1 After SS&N elected to be an S corporation, the
initiative to add Mr. Salem and Mrs. Saxon as comakers came from
them, not from the bank.
Furthermore, the record in this case shows that the bank
looked primarily to the corporation for repayment of the notes.
The minutes of the bank's loan committees indicate that, when the
committees were considering extending loans to SS&N, the
committees considered the corporation's financial statements,
1 Petitioners argue that the notes granted the bank a lien
on any property or deposits of the guarantors or comakers held by
the bank. There is no evidence that the bank ever held any
personal deposits of the Salems or Saxons.
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