Frederick H. Jackson III and Pamela S. Jackson - Page 16

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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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