Douglas A. and Janet Vander Heide - Page 13

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          Respondent does not contend that petitioners were protected by              
          guaranties or stop loss agreements, but rather by nonrecourse               
          financing and “other similar arrangements”.                                 
               When analyzing a transaction under section 465(b)(4), we use           
          the “realistic possibility” or “economic reality” test set forth            
          in American Principals Leasing Corp. v. United States, 904 F.2d             
          477, 483 (9th Cir. 1990) (sometimes cited as Baldwin v. United              
          States), and approved by this Court in Levien v. Commissioner,              
          103 T.C. 120, 126 (1994), affd. without published opinion 77 F.3d           
          497 (11th Cir. 1996).                                                       
               This test asks "whether there is any realistic possibility             
          that the taxpayer ultimately will be subject to economic loss on            
          the investment at issue."  Levien v. Commissioner, supra at 126.            
          In applying this standard, we are guided by the substance of the            
          transaction, not its form.  Id. at 129.  We look not to any                 
          single factor, id. at 127, but to whether the combination of                
          factors and characteristics of the transaction rises to the level           
          of an “other similar arrangement” with the effect of protecting             
          petitioners against risk.                                                   
               Unfortunately in this case, both parties have had to deal              
          with a lack of documentation.  We find, however, no significant             
          difference between the facts of this case and those of Estate of            
          Bradley v. Commissioner, T.C. Memo. 1997-341 (concerning a                  
          partner in the Hambrose Leasing 1984-5 partnership).                        





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