- 8 -
1324 (11th Cir. 1999); Underwood v. Commissioner, 63 T.C. 468,
477 (1975), affd. 535 F.2d 309 (5th Cir. 1976); Prashker v.
Commissioner, 59 T.C. 172 (1972); Perry v. Commissioner, 54 T.C.
1293, 1296 (1970), affd. 392 F.2d 458 (8th Cir. 1971); Raynor v.
Commissioner, 50 T.C. 762, 770-771 (1968); Horne v. Commissioner,
5 T.C. 250, 254 (1945).
Against this background, we now address whether petitioner
may increase his basis in the S corporation by the amount of the
loan. We address specifically petitioner’s contention that his
personal loan guaranty, the pledge of stock, and the bank’s
“control” of Level Propane, either singly or collectively,
constitute an economic outlay.
Personal Guaranty
Shareholder guaranties of loans to an S corporation do not
constitute an economic outlay. Estate of Leavitt v.
Commissioner, supra; Brown v. Commissioner, supra; Spencer v.
Commissioner, supra; Calcutt v. Commissioner, 84 T.C. 716, 719-
720 (1985); Perry v. Commissioner, supra; Raynor v. Commissioner,
supra; Hafiz v. Commissioner, T.C. Memo. 1998-104. But see Selfe
v. United States, 778 F.2d 769, 773 n.7 (11th Cir. 1985).
Guaranteeing a bank loan does not constitute an economic outlay
because the shareholder is only secondarily liable. See Putnam
v. Commissioner, supra at 85. A shareholder must perform under
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