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transactions. Because respondent first raised the at-risk issue
in the answer, respondent bears the burden of proof and so
concedes on brief.
Section 465(a) provides that deductions with respect to the
type of leasing activity represented by this case are only
allowable to the extent of the amount for which the taxpayer is
at risk. Generally, a taxpayer will, subject to the exception in
section 465(b)(4), discussed below, be considered at risk for the
amount of any cash investment. Sec. 465(b)(1)(A). Also, a
taxpayer will be considered at risk for the amounts borrowed with
respect to the activity, to the extent that the taxpayer is
personally liable for the repayment of such amounts. Sec.
465(b)(2)(A).
Respondent concedes that the partnership's transactions had
a business purpose with economic substance, were engaged in for
profit, and that the partnership's equipment was correctly
valued. Respondent also concedes that petitioners were at risk
in the amount of their $40,000 cash investment. Nevertheless,
respondent contends that petitioners were not at risk for the
amount of assumed partnership debt under section 465(b)(4) which
provides:
(4) Exception.--Notwithstanding any other
provision of this section, a taxpayer shall not be
considered at risk with respect to amounts protected
against loss through nonrecourse financing, guarantees,
stop loss agreements, or other similar arrangements.
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Last modified: May 25, 2011