- 23 -
petitioner was a guarantor who had not pledged any individual
assets and who, but for November’s business, was without means to
pay the $1.5 million note to Krieger.
This Court and several U.S. Courts of Appeals have held
that, absent an economic outlay by a taxpayer, guaranties of
loans do not increase basis in S corporation stock. See Estate
of Leavitt v. Commissioner, 90 T.C. 206 (1988), affd. 875 F.2d
420 (4th Cir. 1989) (and cases cited therein). The Court of
Appeals for the Eleventh Circuit held in particular circumstances
that some guaranties may be sufficient to constitute basis where
the facts show that, in substance, the shareholder has borrowed
funds and subsequently advanced them to the corporation. See
Selfe v. United States, 778 F.2d 769, 774 (11th Cir. 1985). The
key factor emphasized by the Court of Appeals was that the
“lender [looked] to [the] shareholder as the primary obligor.”
Id.
Any appeal of our decision here will lie in the Court of
Appeals for the Eleventh Circuit, and, accordingly, we must
decide whether Selfe v. United States would compel our holding
for petitioner on this issue.10 The Selfe v. United States
holding would permit a stepped-up basis where the facts show
10 Under our holding in Golsen v. Commissioner, 54 T.C. 742
(1970), affd. 445 F.2d 985 (10th Cir. 1971), we follow, if it is
directly on point, a holding by the Court of Appeals to which our
decision would be appealable.
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011