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party made to the S corporation. Resolving this issue depends on
whether petitioner made an economic outlay regarding this loan to
allow petitioner to increase his basis in the S corporation. We
hold that he did not.
FINDINGS OF FACT
The parties have stipulated some facts. The stipulation of
facts and the accompanying exhibits are incorporated by this
reference and are so found.
Petitioner is the sole shareholder of several S corporations
involved in the propane gas industry. One S corporation, Level
Propane, Petroleum & Gases Co., an Ohio corporation (Level
Propane),1 generated the losses petitioner claimed as passthrough
deductions in this case. Level Propane provided propane gas to
rural areas in Ohio initially, then expanded into neighboring
States. At its peak, Level Propane provided propane gas and
services to customers in 14 States and had about 600 employees
who generated approximately $18 million in annual revenues.
Level Propane required increasingly large infusions of
capital to sustain its growth. Level Propane’s capital needs
were funded initially with transfers from various S corporations
in which petitioner owned all the shares. Eventually Level
Propane obtained financing from commercial lenders. The specific
1Neptune Propane, Inc., merged into Level Propane during
1993. Throughout this opinion references to Level Propane will
include Neptune to the extent relevant.
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