Larry W. and Cynthia J/ Van Wyk - Page 10

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          intended section 465(b)(1) to operate when there is an overlap in           
          coverage between section 465(b)(1)(A) and (B):                              
               The amounts borrowed by the taxpayer and then                          
               contributed to the activity (or used to purchase                       
               property which is contributed to the activity) are                     
               "amounts borrowed with respect to" the activity (as                    
               referred to in section 465(b)(1)(B)) and therefore are                 
               subject to the rules of section 465(b)(3) even though                  
               amounts (or property) are also described in section                    
               465(b)(1)(A).  [Staff of the Joint Comm. on Taxation,                  
               General Explanation of the Tax Reform Act of 1976, at                  
               39 n.12 (J. Comm. Print 1976).]                                        
          The General Explanation is in accord with our own conclusion as             
          to the operation of the statute.  In short, petitioners fail to             
          marshal any meaningful support for their argument under section             
          465(b)(1)(A).  Accordingly, we hold that the loan does not,                 
          without consideration of section 465(b)(1)(B), constitute money             
          contributed to an activity under section 465(b)(1)(A).                      
          Section 465(b)(1)(B)                                                        
               Petitioners additionally contend that the loan should be               
          considered at risk pursuant to section 465(b)(1)(B).  Petitioners           
          argue that the loan is not subject to the general prohibition of            
          section 465(b)(3)(A) against borrowing from parties with an                 
          interest in the activity because of the exception provided by               
          section 465(b)(3)(B)(ii).  Petitioners argue:                               
               Van Wyk loaned funds to West View, thus fulfilling the                 
               first clause of I.R.C. � 465(b)(3)(B)(ii).  ("In the                   
               case of amounts borrowed by a corporation from a                       
               shareholder . . .").  Because this requirement is met,                 
               Roorda's status as a shareholder is disregarded and                    
               I.R.C. � 465(b)(3) does not apply.  Since Van Wyk was                  

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