- 15 -
though investors nominally may be personally liable with respect
to debt obligations, for income tax purposes they will not be
considered at risk for debt obligations if their ultimate
liability with respect to the debt obligations is protected
against loss through “nonrecourse financing, guarantees, stop
loss agreements, or other similar arrangements.”
The language “other similar arrangements” is not
specifically defined in the Code or in the legislative history,
but the legislative history evidences concern with situations in
which investors are effectively immunized from any realistic
possibility of suffering an economic loss even though the
underlying transaction is not profitable. Levien v.
Commissioner, supra at 125-130; Larsen v. Commissioner, 89 T.C.
1229, 1272-1273 (1987), affd. in part, revd. and remanded in part
sub nom. Casebeer v. Commissioner, 909 F.2d 1360 (9th Cir. 1990);
Bennion v. Commissioner, 88 T.C. 684, 692 (1987); Melvin v.
Commissioner, supra at 70-71; Porreca v. Commissioner, 86 T.C.
821, 838 (1986); S. Rept. 94-938 at 49 (1976), 1976-3 C.B. (Vol.
3) 49, 87.
As applied particularly to a highly leveraged, tax-oriented
equipment leasing transaction (and depending on the issues
raised), the above principles require us to analyze the substance
and commercial realities of all material aspects of the
transaction. Neither the form chosen, the labels used, nor a
single feature of the transaction generally will control.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011