-54-
not assume personal liability for the notes, the members are not
at risk under section 465(b)(1)(B) and (2)(A) with respect to
LCL’s recourse obligations. Cf. Emershaw v. Commissioner,
949 F.2d 841 (6th Cir. 1991), affg. T.C. Memo. 1990-246.
Petitioners seek a contrary result, focusing on the deficit
capital account restoration provision in section 7.7 of the
revised LCL operating agreement. Petitioners argue that this
provision made LCL’s members personally liable for LCL’s recourse
obligations for purposes of applying the at-risk rules. We
disagree. As observed by respondent, section 7.7 contains a
condition that must be met before the deficit capital account
restoration obligation arises. In accordance with that
condition, an LCL member must first liquidate its interest in LCL
before the member has any obligation to the entity. Neither HBW
nor HCC liquidated its interest in LCL during the relevant years.
III. Conclusion
We sustain respondent’s determinations. We have considered
all of petitioners’ arguments for holdings contrary to those set
forth in this Opinion and have rejected those arguments not
discussed herein as meritless. We have considered respondent’s
arguments only to the extent discussed herein.
Decisions will be entered
for respondent.
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