United States Second Circuit
Nathel v. Comm'r. of Int'l. Rev., 09-1955
In an appeal from a decision by the tax court finding that capital contributions petitioners made to two S corporations could not be treated as "tax-exempt income" to the corporations for the purpose of increasing petitioners' bases in loans they made to the corporations, and that petitioners could not deduct their capital contributions as ordinary losses incurred in a trade or business pursuant to 26 U.S.C. section 165(c)(1) or incurred in a transaction entered into for profit pursuant to section 165(c)(2), the order is affirmed where: 1) petitioners' capital contributions did not constitute "tax-exempt income" to the S corporations and, therefore, petitioners were not entitled to increase their bases in their loans; and 2) because the petitioners did not meet their burden of showing that the primary purpose of their capital contributions was to obtain releases from their loan guarantees, the petitioners are not entitled to deductions from ordinary income pursuant to section 165(c)(2).
Appellate Information
- Decided 06/02/2010
- Published 06/02/2010
Judges
Court
- United States Second Circuit