Charles E. and Jacquelyn Yates - Page 7

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          through September 1, 1994, Fox Trot incurred indebtedness to Mr.            
          Yates of $853,557.  Accordingly, Mr. Yates was entitled to                  
          increase his basis in Fox Trot by $2,774,706 as a result of the             
          loans and capital contributions made to Fox Trot before Mr. Yates           
          transferred the Fox Trot stock to Mrs. Yates.  Culnen v.                    
          Commissioner, T.C. Memo. 2000-139 (allowing an S corporation                
          shareholder to increase his basis as a result of similar                    
               The uncontradicted and credible testimony of Mr. Yates                 
          established that Mr. Yates made gifts to Mrs. Yates of the                  
          subsequent transfers from Adena.  Mr. Yates, however, skipped the           
          steps of having Adena transfer such funds to him, depositing the            
          funds into petitioners’ joint account, and then having Mrs. Yates           
          write a check to Fox Trot.  Accordingly, these transfers                    
          increased Mrs. Yates’ basis in Fox Trot.                                    
               Contentions we have not addressed are moot, irrelevant, or             
               To reflect the foregoing,                                              

                                                  Decisions will be entered           
                                             under Rule 155.                          

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Last modified: May 25, 2011