Larry W. and Cynthia J/ Van Wyk - Page 13

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          taxpayer claiming to be at risk for the borrowed amounts is an              
          individual, section 465(b)(3)(B)(ii) does not apply.                        
               The House report accompanying the enactment of the Deficit             
          Reduction Act of 1984 (DEFRA), Pub. L. 98-369, sec. 432(c), 98              
          Stat. 494, 814, the act which added section 465(b)(3)(B)(ii) to             
          the Code, supports our reading of section 465.  The House report            
               Borrowing from related parties                                         
               The bill provides that recourse borrowing from related                 
               parties (including family members and entities                         
               controlled by the taxpayer) may be considered at risk                  
               for purposes of the loss limitation and investment tax                 
               credit at-risk rules.  Except as otherwise provided by                 
               regulations, recourse borrowing will be considered not                 
               at risk when the related party has an interest (other                  
               than as a creditor) in the activity or when the                        
               taxpayer is otherwise protected against loss.  The bill                
               also specifies that a corporation may be considered at                 
               risk with respect to amounts borrowed from its                         
               shareholders to finance participation in an activity.                  
               [H. Rept. 98-432 (Part 2), at 1514-1515 (1984);                        
               emphasis added.6]                                                      

               limitation to the more general "taxpayer" found in �                   
               465(b)(2), * * * to which � 465(b)(3)(B) refers.                       
          Respondent's analysis comports with our own analysis above.                 
          6    The Staff of Joint Committee on Taxation, General                      
          Explanation of the Revenue Provisions of the Deficit Reduction              
          Act of 1984, at 736 (J. Comm. Print 1984), contains nearly                  
          identical language:                                                         
               The Act further provides that, except to the extent                    
               provided in regulations, recourse borrowing will not be                
               considered at risk where the lender has an interest                    

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