- 12 -
On brief, citing Oren v. Commissioner, 357 F.3d 854 (8th
Cir. 2004), and Bergman v. United States, 174 F.3d 928 (8th Cir.
1999), petitioner states that he “agrees with all of those
judicial decisions indicating that circular loans do not create
basis.” Petitioner concedes that the $550,000 that Marc
disbursed to Lakeview reflects a circular loan and does not
provide basis. With respect to the $250,000 that Marc disbursed
to Pleasant Prairie, however, petitioner’s position is more
subtle. Petitioner notes that before Marc made this
disbursement, it owed Pleasant Prairie $204,222. Consequently,
petitioner argues, the $204,222 did not create a loan between
Marc and Pleasant Prairie but rather extinguished a debt. Since
there was no loan between Marc and Pleasant Prairie, petitioner
concludes, there was no “circular loan”, and hence the
transaction increased petitioner’s adjusted basis in Marc by
$204,222.10
As best we understand it, petitioner’s argument appears to
be that because Marc could not recover $204,222 of the $250,000
that it purportedly lent to Pleasant Prairie, petitioner was
exposed to the risk of not recovering $204,222 of his $800,000
9(...continued)
controlling in deciding whether petitioner made any economic
outlay to Marc.
10 Petitioner concedes that the remaining $45,778 of the
$250,000 transaction was a circular loan and provides no basis.
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