Selfe v. United States
United States Court of Appeals for the Eleventh Circuit
778 F.2d 769 (1985)
- Written by Eric Miller, JD
Facts
Jane Selfe (plaintiff) started a clothing business called Jane Simon, Inc., which elected to be an S corporation. For financing, Selfe obtained a $120,000 loan from her bank, using 4,500 shares of Avondale Mills stock as collateral. Selfe held all the stock in Jane Simon, Inc. From 1977 to 1980, Jane Simon, Inc., operated at a loss, but Selfe never defaulted on her payments to the bank. For the 1980 fiscal year, Selfe deducted Jane Simon, Inc.’s $33,824 loss from her own gross income. The United States government (defendant) limited the allowable deduction from the loss to $4,946, determining that Selfe’s adjusted basis in Jane Simon, Inc., did not include the bank loan. Selfe paid the deficiency and brought suit for a refund, arguing that the loan was made to her and invested as equity in the corporation, thus increasing her basis. Selfe presented testimony from a bank officer who stated that the bank looked primarily to Selfe for repayment of the loan. The district court granted summary judgment in favor of the government. Selfe appealed. The United States Court of Appeals for the Eleventh Circuit granted certiorari.
Rule of Law
Issue
Holding and Reasoning (Kravitch, J.)
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