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Petitioners ask us to reconsider that position. In Selfe v.
United States, 778 F.2d at 774, the Court of Appeals for the
Eleventh Circuit, recognized: “That taxpayers rarely, if ever,
have demonstrated that a guarantee was in reality a loan to the
corporation from the shareholder/taxpayer”. Nevertheless, the
Court of Appeals held: “Under the principles of Plantation
Patterns, a shareholder guarantee of a loan may be treated for
tax purposes as an equity investment in the corporation where the
lender looks to the shareholder as the primary obligor.” Id. In
Plantation Patterns v. Commissioner, 462 F.2d at 722–723, the
Court of Appeals for the Fifth Circuit concluded that the
relevant inquiry is whether the guaranty enabled the guarantor to
create borrowing power for the corporation. The relevant point
of inquiry, stated the Court of Appeals, is at the inception of
the guaranty, and the relevant question is whether, at that time,
“there was a reasonable expectation that the business would
succeed on its own.” Id. at 723. See also Santa Anita Consol.,
Inc. v. Commissioner, 50 T.C. 536 (1968), in which we said that
the real differences between a guaranteed loan and a loan to the
guarantor “lie in the debt-creating intention of the parties, and
the genuineness of repayment prospects in the light of economic
realities.” Id. at 552 (quoting American Processing & Sales Co.
v. United States, 178 Ct. Cl. 353, 371 F.2d 842, 857 (1967)
(internal quotation marks omitted)).
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