-2-
purpose of applying the at-risk rules of sec. 465,
I.R.C. Ps also claim that S was at risk for portions
of L’s losses by virtue of a deficit account
restoration provision that, Ps state, made S liable for
portions of L’s recourse obligations.
Held: P1 may not deduct the unrecovered funds as
either a bad debt or a loss of equity.
Held, further, S may not aggregate all of L’s
equipment leasing activities in that sec.
465(c)(2)(B)(i), I.R.C., treats as a single activity
only those activities for which the equipment is placed
in service in the same taxable year.
Held, further, S may not increase its at-risk
amounts on account of the deficit capital account
restoration provision in that the provision was not
operative in the relevant years.
William F. Russo and R. Daniel Fales, for petitioners.2
Gary R. Shuler, Jr., for respondent.
LARO, Judge: The Court has consolidated these cases for
trial, briefing, and opinion. In docket Nos. 4366-03 and
10669-03, Hubert Enterprises, Inc. (HEI), and Subsidiaries
petitioned the Court to redetermine respondent’s determination of
Federal income tax deficiencies of $974,805, $734,093, and
$1,542,820 in its taxable years ended July 27, 1997, August 3,
1998, and July 31, 1999, respectively (HEI’s 1997, 1998, and 1999
2 The petitions in these cases were filed with the Court by
James H. Stethem (Stethem), Mark A. Denney (Denney), and
R. Daniel Fales. Stethem later died and was withdrawn from the
cases on Dec. 1, 2003. Denney withdrew from the cases on Feb. 2,
2005. William F. Russo entered his appearance in docket Nos.
4366-03 and 10669-03 on Feb. 11, 2004, and in docket No. 16798-03
on Mar. 15, 2004.
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