Ronald and Barbara Kimmich - Page 9




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          with respect to the $18,500 cash payment and the three Equity               
          Promissory Notes.  Respondent argues, however, that, as to the              
          long-term Buyer Acquisition Note, petitioner is not at risk                 
          because:  (1)  The Buyer Acquisition Note, though labeled                   
          recourse, is, in substance, nonrecourse and (2) even if the Buyer           
          Acquisition Note is recourse, the transaction protects petitioner           
          against loss under section 465(b)(4).  Because we hold that,                
          under section 465(b)(4), the transaction protects petitioner from           
          loss, we need not decide whether the Buyer Acquisition Note is              
          recourse.  Petitioner, therefore, is not at risk with respect to            
          the Buyer Acquisition Note.                                                 
               Section 465(a)(1) provides that losses from certain                    
          activities are deductible only to the extent that the taxpayer is           
          at risk with respect to each activity at the close of the taxable           
          year.  A taxpayer's amount at risk includes the amount of money             
          and the bases of property contributed to an activity.  See sec.             
          465(b)(1)(A).  The amount at risk also includes amounts borrowed            
          with respect to such activity.  See sec. 465(b)(1)(B).  Pursuant            
          to section 465(b)(2)(A), amounts borrowed with respect to an                
          activity include "amounts borrowed for use in an activity to the            
          extent that * * * [the taxpayer] is personally liable for the               
          repayment of such amounts."  Notwithstanding the foregoing                  
          provisions, a taxpayer's amount at risk does not include amounts            
          protected against loss through nonrecourse financing, guarantees,           





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