- 29 - also argues that petitioners failed to make the requisite economic outlay. Petitioners contend that the substance of the transactions in issue should be respected in accordance with their stipulated form. Petitioners contend that they acquired assets from SSI and then resold those same assets to SPC-SC and SPC-FL, respectively. Moreover, petitioners assert that the transactions constitute so- called back-to-back sales transactions which, similar to so- called back-to-back loan transactions, entitle them to bases as a result of the S corporations' indebtedness to them. Petitioners argue that there is a direct obligation between themselves and their respective S corporations and that the SPC- SC and SPC-FL nominal debts, whether regarded as debt or equity, are sufficient to provide bases at least to the extent of the value of the property acquired by the corporations with such debt instruments. Additionally, petitioners contend that because they remain personally liable on the notes given to SSI (i.e., the S/B and S/S/S notes) they made an actual economic outlay. Petitioners argue that it is the alleged direct indebtedness of the S corporations to petitioners that gives rise to bases within the meaning of section 1366(d)(1)(B) rather than some required economic outlay by the shareholders. Petitioners acknowledge that they failed to follow all of the steps that could have been taken in connection with thesePage: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Next
Last modified: May 25, 2011