- 13 -
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
states:
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]
5(...continued)
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
(continued...)
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011