-53- members liable for LCL’s recourse obligations in that a third party lender did not under the revised LCL operating agreement have the right to force the members to abide by any obligation that LCL failed to honor. We agree with respondent that LCL’s members were not at risk for any of the disputed amounts. Congress enacted section 465 to limit the use of artificial losses created by deductions from certain leveraged investment activities. Such losses may be used only to the extent the taxpayer is at risk economically. Generally, the amount at risk includes (1) the amount of money and the adjusted basis of property contributed to the activity by the taxpayer and (2) borrowed amounts for which the taxpayer is personally liable. Sec. 465(b). The aspect of petitioners’ dispute with respondent’s application of the at-risk rules rests on whether LCL’s members may take into account any part of LCL’s recourse obligations. We agree with respondent that they may not. The recourse notes signed by LCL were not personally guaranteed by LCL’s members, and applicable State (Wyoming) law provides that the members of a limited liability company are not personally liable for the debts, obligations, or liabilities of the company. See Wyo. Stat. Ann. sec. 17-15-113 (LexisNexis 2005). The agreements of LCL also contain no provisions obligating its members to pay LCL’s debts, obligations, or expenses. Because LCL’s members didPage: Previous 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 Next
Last modified: May 25, 2011