T.C. Memo. 1995-458
UNITED STATES TAX COURT
RICHARD SANTULLI AND VIRGINIA SANTULLI, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 24495-89, 16527-93. Filed September 26, 1995.
These cases involve two similar transactions: A
leasing company purchased equipment with funds borrowed
from a bank. The leasing company leased the equipment
to an end-user. Rent payments to be received from the
end-user were assigned to the bank as security for the
loan. The leasing company then sold the equipment to a
middle company, which, in turn, sold the equipment to
P. With regard to both of those sales, substantially
all of the purchase price was evidenced by a long-term
note and the equipment was acquired subject to both the
lease to the end-user and the security interest of the
bank. P then leased the equipment back to the leasing
company. Payments from the leasing company to P, from
P to the middle company, and from the middle company to
the leasing company were, with one small exception,
identical. Sec. 465, I.R.C., limits deductions for
losses from certain activities to the amount for which
the taxpayer is "at risk". Sec. 465(b)(4), I.R.C.,
provides that a taxpayer shall not be considered at
risk with respect to amounts protected against loss
through nonrecourse financing, guarantees, stop-loss
agreements, or other similar arrangements.
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