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personally liable to repay the loan to Roorda, I.R.C. �
465(b)(2) has been satisfied and Van Wyk has amounts
"at risk" under I.R.C. � 465(b)(1)(B).
In essence, petitioners argue that section 465(b)(3)(B)(ii) is
meant to allow at-risk status for a shareholder who borrows money
from another shareholder and then lends it to a corporation owned
by both of the shareholders. Respondent contends that section
465(b)(3)(B)(ii) bears only upon the at-risk status of a
corporation, not its shareholders.
We agree with respondent that the proper interpretation is
that section 465(b)(3)(B)(ii) applies only to allow at-risk
status for a corporate borrower, not to an individual shareholder
merely because he made the loan in question to his corporation.
Section 465(b)(1)(B) and (2) speaks to amounts borrowed by a
taxpayer–-in the instant case, the reference to a taxpayer is to
petitioner. Section 465(b)(3)(A) prohibits at-risk treatment for
those amounts, i.e., the amounts borrowed by the taxpayer (in the
instant case petitioner), if those amounts are borrowed from a
person with an interest in the activity or from a person related
to such a person. Section 465(b)(3)(B)(i) excepts those borrowed
amounts, i.e., allows at-risk treatment, where the only interest
in the activity possessed by the lender (the person from whom the
taxpayer borrowed the money) is a creditor's interest. That
exception does not apply to the instant case because Keith
Roorda's interest in the activity is an equity interest, which is
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