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distinguishable from the facts before us, and, hence, that case
is not controlling.
We first note that the court in Selfe reaffirmed the
principle that “an economic outlay is required” before a
shareholder in an S corporation may increase his or her basis.
Selfe v. United States, supra at 772. Selfe holds, however, that
a shareholder does not, in all circumstances, have to “absolve” a
corporation’s debt to increase basis. Id. (citing Brown v.
Commissioner, 706 F.2d 755 (6th Cir. 1983)). Selfe does not
compel a different conclusion, notwithstanding its holding,
because our facts are distinguishable.
In Selfe, the taxpayer borrowed funds in her individual
capacity, then pledged her personal assets as collateral for a
loan. Id. at 770. The taxpayer later formed an S corporation
and advanced the borrowed funds to the S corporation. Id. The
taxpayer’s loan was, at that point, converted into a loan to the
corporation. The corporation assumed the liability to repay the
loan, and the taxpayer guaranteed repayment if the corporation
did not repay. The taxpayer’s personal assets continued to be
collateral for the corporate liability. Id. at 771.
Petitioner has offered no evidence that he personally
borrowed funds from the bank and then advanced those funds to
Level Propane, or that the bank looked primarily to him for
repayment. In contrast, a bank employee in Selfe testified that
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