Richard Santulli and Virginia Santulli - Page 1

                                 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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