William H. Maloof - Page 11

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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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