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Jerry made the required economic outlay. Jerry is not entitled
to increase his basis in Ram by this payment.
4/4/96 Payment
Petitioners claim to be entitled to increase their basis in
Ram by $100,000 because of this payment. Petitioners argue that
TSI acted as Jerry’s agent in advancing the $100,000 to Ram.
Petitioners point to the date of this $100,000 check and to a
non-interest-bearing note from Ram to Jerry of the same date and
in the same face amount. On the basis of the record as a whole,
we are unpersuaded that this payment constituted an economic
outlay by Jerry or that it created a direct indebtedness of Ram
to Jerry. Jerry’s basis in Ram for 1996 may not be increased by
this amount.
05/17/96 Payment
On May 17, 1996, American borrowed $300,000 from Emerald
Carpets, Inc. The obligation is secured by guaranties by Walker
and Jerry and is evidenced by an interest-bearing promissory note
of the same date. Emerald Carpet, Inc., provided these funds by
writing a $300,000 check to American which was deposited into
Ram’s bank account.
Petitioners claim that this transaction entitles them to
basis of $120,000 in Ram and basis of $30,000 in Innovative.
Petitioners point to a $120,000 non-interest-bearing promissory
note from Ram to Jerry dated June 1, 1996, and a $30,000 non-
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