- 16 - 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)).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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