- 11 -
claim for increased basis resulting from these transactions. Id.
Affirming this Court’s decision, the Court of Appeals for the
Eighth Circuit agreed that the taxpayer’s loans to his S
corporations involved no actual economic outlays. Oren v.
Commissioner, 357 F.3d at 858-859.
Similarly, petitioner’s purported loan to Marc involved no
actual economic outlay. In this case, as in Oren v.
Commissioner, T.C. Memo. 2002-172, the various disbursements
between the taxpayer and his S corporations were “the equivalent
of offsetting bookkeeping entries, even though they occurred in
the form of checks”. The loan proceeds originated and ended with
the Bank. The Bank loan was “collateralized” with $800,000 that
Lakeview and Pleasant Prairie deposited in their Bank accounts
contemporaneously with the Bank loan. In effect, then, the Bank
loan proceeds constituted the collateral for the Bank loan. As
far as the record reveals, the loan proceeds never left the Bank
in the 11 days between the time the note was created and the time
it was paid off.9
9 We are mindful that there was a note evidencing the
$800,000 loan from the Bank and that petitioner prepaid $1,000 in
interest charges to the Bank. Even if we were to assume,
however, that there was a bona fide loan between the Bank and
petitioner, this circumstance would not answer the question of
whether petitioner made any actual economic outlay to Marc.
Indeed, petitioner has conceded that most of the $800,000
transaction was a “circular loan” that created no basis in Marc
for petitioner. In making this concession, petitioner implicitly
acknowledges that the bona fides of the Bank loan are not
(continued...)
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