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B. Section 465
Section 465 limits losses allowable to an individual in
connection with certain activities, including the leasing of
depreciable property, to the amount that the individual is at
risk with respect to the activity at yearend. See sec. 465
(a)(1), (c)(1)(C). Respondent contends that, with respect to the
long-term notes issued by petitioner in connection with both the
computer equipment activity and the telecommunications equipment
activity (viz, the petitioner computer installment note and the
petitioner telecommunications installment note, respectively
(together, the installment notes)), petitioner was not at risk
because he was protected against loss within the meaning of
section 465(b)(4).2
Section 465(b)(4) provides:
Exception.--Notwithstanding any other provision of this
section, 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.
In determining whether a taxpayer is protected against loss
within the meaning of section 465(b)(4), we look to see whether
2 Additionally, respondent argues that petitioner is not at
risk because he is not personally liable on the installment notes
(see sec. 465(b)(1) and (2)) and, with respect to the computer
installment note, petitioner is indebted to a party with an
interest in the activity (Sha-Li) other than as a creditor (see
sec. 465(b)(3)). Respondent would disregard the existence of
Proz. Since we agree that petitioner was protected against loss
within the meaning of sec. 465(b)(4), we need not address
respondent's additional arguments.
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