William H. Maloof - Page 12

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          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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