Court Opinion

ID: 4486058
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:34:09.491597+00
Date Added: 2024-06-11T15:03:47.653948
License: Public Domain

WILLIAMS, J. concurring: I agree with the result of the majority opinion and concur that petitioners should be stuck with the form of the transaction they chose. The majority opinion, however, unnecessarily rejects the reasoning of Selfe v. United States, 778 F.2d 769 (11th Cir. 1985). Selfe involved a sole shareholder’s guarantee, and because the bank looked to that shareholder for repayment, the form of the transaction had no tax significance. The shareholder could be properly viewed as in effect contributing the proceeds of the loan to the corporation. Unlike Selfe, this case involves a guarantee by multiple shareholders. In the case of the sole shareholder’s guarantee of a loan to his financially strapped corporation, no doubt exists about to whom the bank is really looking for repayment of the loan. In the case of multiple shareholders’ guarantees, however, doubt about who is hable on the loan persists, except to the extent that payments are made on the loan. In this case, even if petitioners have shown that the bank looked to them as a group, no rationale exists for allocating the proceeds of the loan as deemed contributions to capital among the shareholders. Each is jointly and severally hable for the amount of the loan (except for Mr. Cuzzocrea whose habihty is capped at $300,0.00). As a result of this ambiguous habihty, if a shareholder’s basis in his stock turns on to whom the bank looks for repayment, each shareholder could rightly claim to have contributed the entire proceeds of the loan because each shareholder could have properly argued that the bank could look only to him for repayment. The result of such claims would be an unwarranted multiphcation of basis which is contrary to the purpose and intent of sections 1012 and 1374 and which violates the integrity of the tax law. This unwarranted multiphcation of basis cannot occur for a sole shareholder’s guarantee. I beheve there are circumstances, limited to cases involving the sole shareholder, where the Selfe rationale can be correctly apphed. We do not need to reject Selfe in this case, and I view the majority’s attempt to do so as dicta;