- 37 -
claimed losses for the years in issue, the deductions are not
allowable because petitioners were not "at risk" within the
meaning of section 465 with respect to the Huntington
indebtedness.
Section 465(a) limits the losses a taxpayer may deduct with
respect to a particular activity to the "aggregate amount with
respect to which the taxpayer is at risk * * * for such activity".
Sec. 465(a); Alexander v. Commissioner, 95 T.C. 467, 469 (1990),
affd. without published opinion sub nom. Stell v. Commissioner,
999 F.2d 544 (9th Cir. 1993). Section 465(c)(3)(A)(i) provides
that the "at risk" rules apply to each activity engaged in by the
taxpayer in carrying on a trade or business or for the production
of income.
A taxpayer's "at risk" amount includes the amount of money
and the adjusted basis of other property contributed by the
taxpayer to the activity, section 465(b)(1)(A), as well as certain
amounts borrowed with respect to the activity.26 Sec.
465(b)(1)(B). For borrowed amounts relating to a particular
activity, a taxpayer is considered to be "at risk" where the
taxpayer is personally liable for repayment of such amounts or has
pledged assets unrelated to the business for which the money was
borrowed. Sec. 465(b)(2)(A) and (B); Krause v. Commissioner, 92
26 The determination of the amount that a taxpayer has "at
risk" as to a given activity is made at the close of the taxable
year. Sec. 465(a)(1).
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