- 17 -
difficulty) is not to be material unless and until the
time when the taxpayer becomes unconditionally entitled
to payment and, at that time, demonstrates that he
cannot recover under the agreement. [S. Rept. 94-938 at
50 n.6 (1976), 1976-3 C.B. (Vol. 3) 49, 88.]
In Thornock v. Commissioner, 94 T.C. 439 (1990), a case with
facts similar to the instant case, we held that no realistic
possibility existed that limited partners would be ultimately
liable on partnership debt obligations. Our holding was based
primarily on the presence of rent guaranties, the essentially
offsetting nature of the various lease and note payments, the
nonrecourse nature of the underlying third-party loan, and other
insulating features of the equipment leasing transaction. We
emphasized that no one feature of the transaction controlled our
analysis.
The parties have agreed that under New York commercial law
the underlying $1,868,657 third-party loan from MHLC to Alanthus
should be treated as a recourse loan. See N.Y.U.C.C. section 9-
504(2) (McKinney 1990), which provides that a secured loan
generally is to be treated as a recourse loan where the parties
to the loan fail to designate the loan as either recourse or
nonrecourse.5
5 N.Y.U.C.C. sec. 9-504(2) (McKinney 1990) provides in part
as follows:
(2) If the security interest secures an
indebtedness, the secured party must account to the
debtor for any surplus [after proceeds from the sale of
(continued...)
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