-4-
issue of first impression, petitioners claim that section
465(c)(2)(B)(i) aggregates these activities into a single
activity for purposes of applying the at-risk rules of section
465.3 Petitioners also claim that the members of the passthrough
entity, a limited liability company named Leasing Co., LLC (LCL),
were at risk for LCL’s losses by virtue of a deficit account
restoration provision that, petitioners state, made LCL’s members
liable for portions of LCL’s recourse obligations. We hold that
HHC may not deduct equipment leasing activity losses greater than
those allowed by respondent in the notice of deficiency.
FINDINGS OF FACT
Some facts were stipulated. We incorporate herein by this
reference the parties’ stipulation of facts and the exhibits
submitted therewith. We find the stipulated facts accordingly.
I. HEI
HEI was organized by the Hubert Family Trust (HFT) on or
about October 8, 1992. HEI’s only shareholder has always been
HFT. When HEI’s petitions were filed with the Court, its mailing
address was in Cincinnati, Ohio.
For HEI’s 1997, 1998, and 1999 taxable years, HEI was the
parent corporation of an affiliated group of corporations that
filed consolidated Federal corporate income tax returns. For
3 Unless otherwise noted, section references are to the
applicable versions of the Internal Revenue Code, and Rule
references are to the Tax Court Rules of Practice and Procedure.
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