Emery Ellinger, III v. United States

BIRCH, Circuit Judge:

In this appeal, we must decide whether certain monetary transfers from one Internal Revenue Code Subchapter S corporation (“Scorporation”) to two other S corporations constituted bona fide loans, and, if so, whether those loans were effectively discharged, thereby resulting in cancellation of indebtedness income to the borrower corporations and their shareholder, Emery Ellinger, III (“Ellinger”). 1 The district court concluded that the distributions at issue were not true loans and that, therefore, Ellinger, as a shareholder in the borrower S corporations, could not claim…