Connection lost
Server error
J.H. Harris, and William J. Martin v. United States Case Brief
Why Top Law Students (And Those Aspiring to Be) Use LSD+ Briefs
Let's be real, law school is a marathon. Our exclusive Flash-to-Full case system is designed by Harvard Law School and MIT grads to match your pace: Quick summaries when you're slammed, detailed analysis when you need to go deep. Only LSD+ offers this kind of flexibility to genuinely fit your study flow.
Adaptive Case Views
Toggle between Flash, Standard, and Expanded. Get what you need, when you need it.
Exam-Ready IRAC Format
We deliver the precise structure professors look for in exam answers.
Complex Cases, Clarified
We break down dense legal reasoning into something digestible, helping you grasp core concepts.
Case Brief Summary & Legal Analysis
tl;dr: S-corporation shareholders personally guaranteed a corporate loan but were denied an increase in their stock basis to deduct corporate losses. The court held that a guarantee, without actual payment, is not an ‘economic outlay’ sufficient to increase basis, respecting the transaction’s form as a loan to the corporation.
Legal Significance: This case establishes in the Fifth Circuit that an S-corporation shareholder’s guarantee of corporate debt does not increase their basis for loss deduction purposes until the shareholder makes an actual economic outlay by paying the debt. It rejects a substance-over-form analysis favored by other circuits.
J.H. Harris, and William J. Martin v. United States Law School Study Guide
Use this case brief structure for your own legal analysis. Focus on the IRAC methodology to excel in law school exams and cold calls.
Case Facts & Court Holding
Key Facts & Case Background
J.H. Harris and William J. Martin (Taxpayers) formed Harmar, a Subchapter S corporation, to purchase and operate a commercial property. Harmar obtained a $700,000 loan from Hibernia National Bank to finance the acquisition. The loan documents, including two promissory notes, identified Harmar as the sole borrower. The Taxpayers, as the sole shareholders, each personally executed a continuing guarantee for the full $700,000 loan. Additionally, Harris pledged personal certificates of deposit worth approximately $355,000 as collateral for one of the notes. Harmar made all payments on the loan from its corporate account and deducted the interest expense on its tax return. In its first year, Harmar incurred a net operating loss of $104,013. The Taxpayers each deducted half of this loss on their personal returns, claiming their basis in Harmar included the $700,000 loan they guaranteed. The IRS disallowed the portion of the loss deduction that exceeded the Taxpayers’ actual capital contributions and direct loans to the corporation, which totaled $48,500 each. The Taxpayers paid the resulting deficiency and sued for a refund.
Court Holding & Legal Precedent
Issue: Does a shareholder’s personal guarantee of a loan made directly to their S corporation, without any payment by the shareholder on that guarantee, constitute an ‘economic outlay’ sufficient to increase the shareholder’s stock basis under I.R.C. § 1374(c)(2)?
No. The court held that the taxpayers’ guarantees and collateral pledges did Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in repreh
IRAC Legal Analysis
Complete IRAC Analysis for Higher Grades
IRAC (Issue, Rule, Analysis, Conclusion) is the exact format professors want to see in your exam answers. Our exclusive Flash-to-Full briefs combine holding, analysis, and rule statements formatted to match what A+ students produce in exams. These structured briefs help reinforce the essential legal reasoning patterns expected in law school.
Legal Issue
Does a shareholder’s personal guarantee of a loan made directly to their S corporation, without any payment by the shareholder on that guarantee, constitute an ‘economic outlay’ sufficient to increase the shareholder’s stock basis under I.R.C. § 1374(c)(2)?
Conclusion
This case solidifies the Fifth Circuit's adoption of the strict 'economic outlay' Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo co
Legal Rule
Under I.R.C. § 1374(c)(2) (now § 1366(d)(1)), a shareholder's basis in an Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit am
Legal Analysis
The Fifth Circuit affirmed the summary judgment for the government, aligning itself Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor
Flash-to-Full Case Opinions
Flash Summary
- A shareholder’s personal guarantee of an S-corporation’s debt does not increase