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profitability and strong equity position, deposits maintained
with the bank, proposed use of loan proceeds, security
(furniture, fixtures, and equipment), reputation and client base,
hiring of additional attorneys, real property interests, and
total indebtedness to the bank. Applying the test applied by the
Eleventh Circuit in Selfe v. United States, supra, we find that
the loans were made to the corporation and not to the
shareholders. See Spencer v. Commissioner, 110 T.C. (1998).
Petitioners contend that the facts in this case are the same
as those in Gilday v. Commissioner, T.C. Memo. 1982-242. We
disagree. In Gilday, the bank originally made the loan to the S
corporation, and the shareholders guaranteed the loan. Later,
the shareholders gave their personal note to the bank and the
bank canceled the corporation's notes. We held that the
substitution of the shareholders' note to the bank for the notes
of the corporation created a valid debt from the corporation to
the shareholder. We think the facts in this case are
distinguishable from those in Gilday. As we noted in Hitchins v.
Commissioner, 103 T.C. 711, 718 (1994), the shareholders in
Gilday became the "sole obligors" to the bank. In this case
petitioners merely signed the notes as comakers, the
corporation's debt was not canceled, and the corporation's assets
continued to secure the debt. The fact that petitioners were
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