Hubert Enterprises, Inc. and Subsidiaries, et al. - Page 2

                                         -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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