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The taxpayer in Selfe borrowed funds in her individual
capacity and pledged her personal assets as collateral. Id. at
770. She later formed an S corporation and advanced the borrowed
funds to the corporation. Id. The taxpayer’s loan was converted
into a loan to the corporation. The corporation assumed the
liability for repayment of the loan, and the taxpayer guaranteed
repayment if the corporation did not repay. The taxpayer’s
personal assets continued to be collateral for the corporate
liability. Id. at 771. The U.S. Court of Appeals for the
Eleventh Circuit held that shareholder guaranties of subchapter S
corporate indebtedness increase the shareholder's tax basis in
his or her stock in the corporation where, in substance, the
shareholder borrowed funds and advanced them to the corporation.3
Id. Unlike Selfe, there is no evidence in this case that
petitioner personally borrowed funds and then advanced those
funds to Green Valley or that he pledged personal assets as
collateral or that creditors of Green Valley looked primarily to
him for repayment. We conclude that Selfe v. United States,
supra, is distinguishable and does not control this case.4
3 Because material facts in Selfe v. United States, 778
F.2d 769 (11th Cir. 1985), remained in dispute, the U.S. Court of
Appeals for the Eleventh Circuit remanded the case to the trial
court to evaluate whether the loan from the bank should be
treated in reality as a loan to the taxpayer and then to the S
corporation.
4 Because Selfe does not control here, we need not decide
(continued...)
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