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Respondent determined deficiencies of $6,580 and $4,232 in
petitioner’s 1995 and 1996 Federal income taxes, respectively.
This Court must decide whether losses claimed by petitioner are
subject to the passive activity loss limitations under section
469.
Some of the facts in this case have been stipulated and are
so found. Petitioner resided in Albany, New York, at the time he
filed his petition.
During the taxable years at issue, petitioner owned 34.72
percent of the outstanding shares of VBR Corporation (VBR). VBR
is an S corporation, which owns and operates bowling alleys.
In 1995, VBR sought financing in order to purchase automatic
scoring equipment (equipment). Because of VBR’s loss history,
the company was unable to obtain the requisite financing. One
lender was willing to make a loan directly to petitioner.
Petitioner secured the loan and purchased the equipment.
Subsequently, petitioner entered into a written lease agreement
with VBR reflecting the lease of petitioner’s equipment to VBR
(the lease agreement).
The lease agreement was effective on August 1, 1995, and
would terminate on August 15, 2002. The lease agreement provided
for monthly payments to be made by VBR to petitioner in the
amount of $3,320.07. VBR was required to maintain the equipment
in good condition, to purchase insurance with respect to the
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