Frederick H. Jackson III and Pamela S. Jackson - Page 1

                                 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                   

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