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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 did
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