Bill L. and Patricia M. Spencer - Page 29

                                       - 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 these               

Page:  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