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for which he assumed personal liability. Since respondent first
raised this issue in the answer, respondent bears the burden of
proof. Rule 142(a).
Section 465(a) provides that deductions with respect to
liabilities of the type involved in this case are allowable only
to the extent the taxpayer is "at risk". A taxpayer's amount at
risk includes the amount of money and the basis of property
contributed to an activity. Sec. 465(b)(1)(A). Also, a taxpayer
is considered at risk for amounts borrowed with respect to the
activity. Sec. 465(b)(1)(B). The statute defines amounts
borrowed with respect to an activity as including "amounts
borrowed for use in an activity to the extent that * * * [the
taxpayer] is personally liable for the repayment of such
amounts". Sec. 465(b)(2)(A).
Respondent agrees that the partnership's sale-leaseback
transactions had a business purpose with economic substance, were
engaged in for profit, and that the partnership's equipment was
correctly valued. Respondent further agrees that petitioner was
"at risk" in the amount of his $20,000 investment, which
consisted of $4,600 cash and the $15,400 Investor Note that
petitioner executed upon purchasing his interest in the
partnership, and for which he was personally liable.
Respondent also agrees that petitioner assumed a pro rata
share of the Limited Recourse Note. Respondent contends,
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