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3. Whether Petitioner’s 1998 Promissory Note to Shuster’s
Transportation Was an Economic Outlay in 1996-97
Petitioners contend that petitioner may increase his basis
in Green Valley for 1996-97 in the amount of the payments made on
his 1998 note to Shuster’s Transportation because he signed that
note pursuant to his guaranty, which was in effect in 1996-97,
and that this constituted an economic outlay in 1996-97.
Petitioners contend that petitioner’s basis includes the amount
of the guaranty because petitioner’s guaranty made him poorer in
a material sense in 1996-97. Petitioners contend that petitioner
could not responsibly sell or use his personal assets as
collateral (other than for his guaranty to Green Valley’s
creditors) in those years, and that doing so would have violated
his obligation under the guaranty. We disagree.
Petitioner did not make an economic outlay under the
guaranty in 1996-97. A taxpayer/shareholder makes an economic
outlay when he or she is left poorer in a material sense after
the transaction. Estate of Bean v. Commissioner, 268 F.3d 553,
558 (8th Cir. 2001), affg. T.C. Memo. 2000-355; Bergman v. United
States, 174 F.3d 928, 930 n.6 (8th Cir. 1999); Underwood v.
Commissioner, 63 T.C. 468, 477 (1975), affd. 535 F.2d 309 (5th
Cir. 1976); Perry v. Commissioner, 54 T.C. 1293, 1296 (1970);
Horne v. Commissioner, 5 T.C. 250, 254 (1945). Petitioner’s
voluntary refusal, if any, to sell or use personal assets was not
a pledge of those assets, nor did it constitute an expenditure of
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