- 6 -
F.2d 420, 422 (4th Cir. 1989), affg. 90 T.C. 206 (1988).
Accordingly, mere shareholder guaranties of corporate
indebtedness to third parties generally do not qualify as an
economic outlay, and they do not qualify as indebtedness from the
S corporations to the shareholders “until and unless the
shareholders pay part or all of the * * * [corporate
indebtedness].” Raynor v. Commissioner, 50 T.C. 762, 771 (1968);
see also Bergman v. United States, supra; Perry v. Commissioner,
47 T.C. 159, 162-163 (1966), affd. 392 F.2d 458 (8th Cir. 1968).
Likewise, where corporate indebtedness to third parties is merely
secured by the shareholders' property, no economic outlay has
occurred, no indebtedness to the shareholders exists, and
shareholders are not entitled to increase their bases in the
S corporation by the amount of the corporate indebtedness secured
by the shareholders. See Calcutt v. Commissioner, 84 T.C. 716,
720 (1985); Erwin v. Commissioner, T.C. Memo. 1989-80.
While taxpayers are free to organize their affairs as they
choose, once having done so, taxpayers generally are held to the
tax consequences of their choice and may not enjoy the benefit of
some other route that they might have chosen to follow but did
not. See Commissioner v. National Alfalfa Dehydrating & Milling
Co., 417 U.S. 134, 149 (1974), cited in Selfe v. United States,
778 F.2d 769, 773 (11th Cir. 1985).
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