Ronald and Barbara Kimmich - Page 10




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          stop loss agreements, or other similar arrangements.  See sec.              
          465(b)(4).                                                                  
               Petitioners contend that we should analyze the facts of the            
          instant case under the "worst case scenario" test articulated in            
          Emershaw v. Commissioner, 949 F.2d 841 (6th Cir. 1991), affg.               
          T.C. Memo. 1990-246, rather than the "economic reality" test used           
          by this Court and the vast majority of circuit courts that have             
          considered the issue.  See Levien v. Commissioner, 103 T.C. 120,            
          126-129 (1994), affd. without published opinion 77 F.3d 497 (11th           
          Cir. 1996).  To date, the Court of Appeals for the Third Circuit,           
          the venue for any appeal of the instant case, has yet to adopt              
          either test.8  Petitioners contend, however, that, based upon               
          Nicholson v. Commissioner, 60 F.3d 1020 (3d Cir. 1995), revg.               
          T.C. Memo. 1994-280, this Court should analyze the instant case             
          under the "worst case scenario" standard.  We disagree.                     
               Nicholson involved an appeal of this Court's refusal to                
          award a taxpayer attorney's fees under section 7430.  See                   
          Nicholson, supra at 1024.  The Commissioner initially contended             
          that the taxpayer was not at risk with respect to a long-term               
          note used to finance a computer purchase and leaseback                      
          transaction. See id. at 1023.  In particular, the Commissioner              
          argued that the form of the taxpayer's transaction constituted a            


          8    See Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445              
          F.2d 985 (10th Cir. 1971).                                                  





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