- 40 -
Spencer never paid anything. Rather than accounting for the
$250,000 bank loan as a capital contribution or loan by the
shareholders, SPC-SC's Schedules L for the years in issue
reflected that its capital stock was only the SPC-SC
shareholder's $1,000 initial capital contribution and that its
paid-in capital was zero. There is no indication that
petitioners treated the bank loan as a personal loan by reporting
SPC-SC's interest payments to SCNB as constructive dividend
income. Moreover, petitioners claimed no interest deductions for
amounts paid by SPC-SC to SCNB. Petitioners were not free to use
the funds as they chose--SCNB directed that the proceeds be paid
directly to SSI. Accordingly, we conclude that SCNB primarily
looked to SPC-SC for repayment of the bank loan. Consequently,
petitioners' reliance on Selfe v. United States, 778 F.2d 769
(11th Cir. 1985), is of no avail.
We have considered the parties' remaining arguments
regarding the basis issues for purposes of section 1366(d) and
conclude that they are either without merit or unnecessary to
reach in light of our holdings above.
Amortization Issue
Upon purchase of the assets, SPC-SC and SPC-FL erroneously
amortized the cost of the acquired intangible contract rights
based on 100 percent of the cost of such contracts. The parties
now agree that the original amortizable bases of the acquired
Page: Previous 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 NextLast modified: May 25, 2011