T.C. Memo. 2001-61
UNITED STATES TAX COURT
FREDERICK H. JACKSON III AND PAMELA S. JACKSON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11045-98. Filed March 13, 2001.
R denied P deductions for his pro rata share of
the losses of an S corporation on the grounds that P
had insufficient adjusted basis in his S corporation
shares. See sec. 1366(d)(1), I.R.C. P argues that
the corporation lacked borrowing power and his guaranty
of loans to the S corporation should be deemed to
signify his borrowing of the loan proceeds and
subsequent contribution of those proceeds to the
capital of the S corporation, which would increase his
adjusted basis sufficiently for him to deduct the
losses in question.
Held: P has failed to prove that the indebtedness
in question was not indebtedness of the S corporation;
therefore, P has failed to prove that he had sufficient
adjusted basis to deduct the S corporation losses in
question.
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