- 12 -
the bank looked to the taxpayer as primary obligor. Id. at 774.
Petitioner has offered no analogous testimony, and we can infer
the testimony would have been adverse to petitioner. See Wichita
Terminal Elevator Co. v. Commissioner, 162 F.2d 513, 515 (10th
Cir. 1947), affg. 6 T.C. 1158 (1946).
The facts in our case indicate the bank looked primarily to
the S corporation for repayment, not petitioner.11 In Spencer v.
Commissioner, 110 T.C. at 85-86, where appeal lay to the Court of
Appeals for the Eleventh Circuit, Selfe was distinguished because
this Court was not persuaded the bank looked primarily to the
taxpayer for repayment, even though the taxpayer had pledged
personal assets as collateral. Similarly, the collateral on
which the bank depended in this case belonged to the corporate
debtor, not petitioner. Until the bank calls upon petitioner
individually to make some payment on the loan, petitioner has
experienced no economic outlay and may not increase his basis in
the S corporation. Because petitioner has offered no evidence
that the bank looked primarily to him for repayment, we conclude
that Selfe is distinguishable and, therefore, does not control
this case. See Metzger Trust v. Commissioner, 76 T.C. 42, 72-74
(1981) (factual distinctions render decision of Court of Appeals
11Petitioner would garner a basis increase if, for example,
his pledged shares in the S corporation were foreclosed by the
bank and their value were applied toward the balance of the loan.
If that were to occur, petitioner would have incurred a cost and,
consequently, made an economic outlay.
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