- 19 -
petitioners' other arguments but find them irrelevant or
unnecessary to reach.11
11 Petitioners assert that petitioner's liability under the
Buyer Acquisition Note, because it is negotiable, potentially
"runs to the world" and that this fact puts petitioner at risk
with respect to the note. The court in Waters v. Commissioner,
978 F.2d 1310, 1317 (2d Cir. 1992), affg. T.C. Memo. 1991-462,
addressed, and rejected, this same argument. The court decided,
on facts very similar to those of the instant case, that the
possibility that the note might be negotiated was "more
theoretical than realistic." Id. The court stated, "If at some
future date the unexpected occurred and the note was negotiated
to a third party, * * * [the taxpayer] might at that juncture
become at risk and be able to take deductions unavailable in
prior years." Id. Petitioners' argument is likewise rejected in
the instant case.
Petitioners additionally argue that petitioner should be
considered at risk regarding the Buyer Acquisition Note under the
Court of Appeals' reasoning in Peracchi v. Commissioner, 143 F.3d
487 (9th Cir. 1998), revg. T.C. Memo. 1996-191. We disagree,
because Peracchi is inapplicable to the instant case. Although
the court mentioned section 465 in passing, see id. at 493 ("The
Code seems to recognize that economic exposure of the shareholder
is the ultimate measuring rod of a shareholder's investment. Cf.
I.R.C. � 465 (at-risk rules for partnership investments)"),
Peracchi dealt with an entirely different issue under subchapter
C. Moreover, the court expressly confined its holding to cases
where a "note is contributed to an operating business which is
subject to a non-trivial risk of bankruptcy or receivership."
Id. at 493 n.14. Those facts are not before us in the instant
case.
Additionally, petitioners rely on Martuccio v. Commissioner,
30 F.3d 743 (6th Cir. 1994), revg. T.C. Memo. 1992-311, where the
Court of Appeals for the Sixth Circuit ruled favorably for a
taxpayer on the "at risk" issue. The taxpayer in Martuccio
invested in a computer purchase and leaseback transaction, also
involving Elmco, similar in some respects to the one in the
instant case. Petitioners contend that, were we to hold for
respondent, we would be treating petitioners differently from
other similarly situated taxpayers because they reside in the
Third Circuit rather than the Sixth Circuit (where the worst case
scenario standard is applied under sec. 465(b)(4)). Petitioners
argue that "But for this accident of geography the government
(continued...)
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