The ABA Section of Taxation asks IRS for clarifications to proposed regulations (REG-134042-07) regarding basis increases permitted S corporation shareholders for loans made to their corporations. Overall, the group praises the rules as “helpful and necessary guidance.” The rules would do away with a much-criticized “actual economic outlay test” applied solely in situations involving S corporations and instead apply general federal tax principles to allow a basis increase where there is a bona fide indebtedness.