William H. Maloof - Page 10

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          and, second, petitioner’s argument that the precedent in the                
          Eleventh Circuit compels a different result.9                               
               Courts have indicated that pledging personal assets is not             
          an economic outlay sufficient to increase basis.  See Harris v.             
          United States, 902 F.2d 439, 445 n.16 (5th Cir. 1990); see also             
          Calcutt v. Commissioner, supra at 719-720; Luiz v. Commissioner,            
          T.C. Memo. 2004-21.  But see Selfe v. United States, supra at 773           
          n.7.  Moreover, petitioner has offered no authority, other than             
          an ambiguous invocation of Eleventh Circuit precedent, that                 
          pledging stock might constitute an economic outlay.10  Perhaps              
          petitioner is relying on Selfe, though he failed to cite the case           
          at trial or in brief.  This Court has previously disagreed with             
          the analysis in Selfe.  Estate of Leavitt v. Commissioner, 90               
          T.C. 206 (1988).  Nonetheless, we find the facts in Selfe                   

               9Presumably finding Eleventh Circuit precedent more                    
          favorable to his position, petitioner claims he resided, at the             
          time he filed the petition, with his mother in Florida, which is            
          in the Eleventh Circuit, rather than with his wife in Ohio, which           
          is in the Sixth Circuit.  See sec. 7482.  Without deciding                  
          whether petitioner resided in the Eleventh Circuit, we focus on             
          whether caselaw in the Eleventh Circuit would characterize                  
          petitioner’s pledge of stock as an economic outlay that would               
          increase his basis in the S corporation.                                    
               10A footnote states that a guarantor who has pledged stock             
          to secure a loan “has experienced an economic outlay” to the                
          extent that the pledged stock is not available as collateral for            
          other investments, because the guarantor has lost the time value            
          or use of his or her collateral.  Selfe v. United States, 778               
          F.2d 769, 773 n.7 (11th Cir. 1985).  Although petitioner failed             
          to bring this footnote to our attention, we read it in the                  
          context of the facts in Selfe, which we distinguish.                        

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