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that, in substance, the shareholder has borrowed funds from a
third party and subsequently advanced them to the corporation.
In particular, the Court of Appeals emphasized that it would be
relevant whether the creditor looked to the shareholder as the
primary obligor in the circumstances of Selfe v. United States,
supra. The circumstances here are factually distinguishable from
Selfe. See Spencer v. Commissioner, 110 T.C. 62, 83-87 (1998),
affd. without published opinion 194 F.3d 1324 (11th Cir. 1999).
Petitioner had no individual assets and did not put up any
security. More significantly, November’s bingo business income
was the sole source available and one which had been specifically
designated for payment of the debt to Krieger.
Accordingly, we do not feel compelled to follow Selfe in
this instance and, instead, hold that petitioner is not entitled
to increase his basis in his S corporation with respect to any
part of the $1.5 million debt to Krieger.11
Should Respondent’s Determination of a Negligence Penalty Under
Section 6662(a) Be Sustained for 1991, 1992, or 1993?
Respondent, for each of the 3 taxable years, determined an
accuracy-related penalty, based on negligence, under section
6662(a). That section imposes an addition to tax in the amount
of 20 percent of any portion of the underpayment attributable to
11 The Court leaves the parties to the task of computing
petitioner’s correct basis in their Rule 155 computation(s) in
accord with our findings and holdings.
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