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there is any realistic possibility that the taxpayer ultimately
will be subject to economic loss on the investment at issue.
Levien v. Commissioner, 103 T.C. 120, 126 (1994).
"[T]he purpose of subsection 465(b)(4) is to suspend at
risk treatment where a transaction is structured--by
whatever method--to remove any realistic possibility
that the taxpayer will suffer an economic loss if the
transaction turns out to be unprofitable. A
theoretical possibility that the taxpayer will suffer
economic loss is insufficient to avoid the
applicability of this subsection. We must be guided by
economic reality. If at some future date the
unexpected occurs and the taxpayer does suffer a loss,
or a realistic possibility develops that the taxpayer
will suffer a loss, the taxpayer will at that time
become at risk and be able to take the deductions for
previous years that were suspended under this
subsection. I.R.C., sec. 465(a)(2)."
Waters v. Commissioner, 978 F.2d 1310, 1315 (2d Cir. 1992)
(quoting with approval American Principals Leasing Corp. v.
United States, 904 F.2d 477, 483 (9th Cir. 1990)), affg. T.C.
Memo. 1991-462.
The question presented is one of fact, and petitioners bear
the burden of proof. Rule 142(a). With regard to leasing
activities, we scrutinize the economic reality of the
transaction, focusing in particular upon the relationships
between the parties, whether the underlying debt is nonrecourse,
the presence of offsetting payments and bookkeeping entries, the
circularity of the transaction, and the presence of any payment
guarantees or indemnities. See Waters v. Commissioner, supra at
1316-1317; Young v. Commissioner, 926 F.2d 1083, 1088 (11th Cir.
1991), affg. T.C. Memo. 1988-440; Moser v. Commissioner, 914 F.2d
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