Harris v. United States
United States Court of Appeals for the Fifth Circuit
902 F.2d 439 (1990)
Facts
J. H. Harris and William J. Martin (plaintiffs) owned an S corporation, Harmar. Harris and Martin each contributed $1,000 cash and a $47,500 loan to Harmar. Harris and Martin each received half of Harmar’s stock. Harmar purchased a theater using funds borrowed from Hibernia National Bank (Hibernia). Harris and Martin made personal guarantees on the loan from Hibernia to Harmar. Harris and Martin both claimed net-operating-loss deductions on their individual tax returns due to losses incurred by Harmar. However, the losses claimed exceeded Harris’s and Martin’s adjusted bases in Harmar, so the Internal Revenue Service (IRS) (defendant) disallowed a portion of their deductions. Harris and Martin filed a claim for a refund in district court. The district court dismissed their claim. Harris and Martin appealed the dismissal to the United States Court of Appeals for the Fifth Circuit.
Rule of Law
Issue
Holding and Reasoning (Garwood, J.)
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