- 29 -
interests to recover its loss. As it affects petitioner, the RTS
promissory note was nonrecourse, and we so find.
4. Payment Deferral Provisions
Both installment notes give petitioner the right to defer
any or all note payments owed to Proz to the extent amounts due
petitioner under the Sha-Li lease or the RTS lease, respectively,
are not received when due. Thus, even if the underlying debts of
Sha-Li and RTS under the assignment agreements and the loan
agreement, respectively, were not recourse, petitioner's
obligations during the years in issue would be "theoretical", in
the words of the Court of Appeals for the Second Circuit in
Waters v. Commissioner, 987 F.2d at 1317.
5. Indemnities
In connection with the computer equipment activity, under
the Sha-Li lease, Sha-Li agreed to indemnify, hold harmless, and
defend petitioner against certain risks and any losses attendant
to those risks. Included was any claim arising in connection
with MHLC's security interest in the computer equipment or the
assignment of payments due under the BNY leases to MHLC. The
indemnification provisions of the Sha-Li lease eliminate for
petitioner any risk of default if MHLC stops receiving rent
payments from BNY.
In connection with the telecommunications equipment
activity, under the RTS lease, RTS agreed to indemnify petitioner
and protect, defend, and hold him harmless from losses in any way
Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 NextLast modified: May 25, 2011