Uri v. Commissioner

949 F.2d 371 (1991)

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Uri v. Commissioner

United States Court of Appeals for the Tenth Circuit
949 F.2d 371 (1991)

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Facts

Cathaleen Uri and Stevens Townsdin (plaintiffs) formed and owned stock in the Old Opera House Mall Company (mall company), a company taxed as an S corporation under the Internal Revenue Code. Uri and Townsdin created the mall company to operate a small retail mall and dinner theater. Uri and Townsdin each contributed $10,000, and the mall company secured a loan from a local bank for construction and related costs, which Uri and Townsdin personally guaranteed. The mall company’s business could not cover its loan payments, and eventually, Uri, Townsdin, and the mall company all filed for bankruptcy. Uri and Townsdin claimed losses for the mall company on their personal tax returns, including the amount of capital they contributed and their pro rata shares of the amount of the mall company’s loan they each guaranteed. The commissioner of internal revenue (defendant) did not allow Uri’s or Townsdin’s loss deductions for the loan, stating that their guarantees did not actually require them to pay any money and therefore did not count as losses. Uri and Townsdin brought a claim before the United States Tax Court, which upheld the commissioner’s decision. Uri and Townsdin appealed.

Rule of Law

Issue

Holding and Reasoning (Holloway, J.)

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Federal Income Tax

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