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its shareholders. Thus, while petitioners have introduced copies
of checks they wrote to Olympic, they have failed to establish
that those checks were considered or intended to be capital
infusions or loans to Olympic. The checks could represent
repayments of loans from Olympic to petitioners or payments for
expenditures that Olympic made on behalf of petitioners. Without
adequate explanation of the evidence by petitioners or their
return preparer, petitioners have not shown that the payments
were capital in nature or that they constituted loans.
Furthermore, even assuming that the checks were evidence of
direct loans from petitioners, there is no evidence that the
loans were outstanding on December 31, 1992, or that the amounts
had not already been used in claiming 1990 or 1991 flowthrough
losses. Petitioners’ 1991 tax returns indicate that their bases
at the end of 1991 were zero. Therefore, as a threshold matter,
petitioners would have had to show that they made additional
direct contributions or loans to Olympic in 1992, and petitioners
have simply failed to do that.
Petitioners also argue that they pledged personal assets to
secure Olympic’s corporate debt. Despite petitioners’ argument
to the contrary, their pledges of personal assets to secure
Olympic’s debt might indicate that they were guarantors.
However, even if petitioners were guarantors, Selfe v. United
States, 778 F.2d 769 (11th Cir. 1985), does not apply because
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Last modified: May 25, 2011