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recovery from the Rapp Group guarantors, presumably because at
that time petitioner's net worth, disregarding the
Miller/Huntington Loan, was $273,000, consisting primarily of
relatively illiquid assets such as the equity in his residence, an
automobile, and items of personal property. However, had
petitioner's financial circumstances been different, Huntington
was entitled to seek full or partial recovery from him and quite
possibly would have done so. In short, there was no certainty
that the guarantors would be called upon to satisfy the
indebtedness. As a consequence, we conclude that petitioner had a
realistic possibility of loss thereon.
Respondent relies on Levien v. Commissioner, supra, and Oren
v. Commissioner, supra, in support of his contention that
petitioners were protected from loss within the meaning of section
465(b)(4). In those cases, we concluded that the offsetting
obligations of all the parties to an arrangement would cease in
the event of nonpayment by one party, resulting in no loss to the
taxpayer. However, the transactions at issue in those cases bear
no meaningful resemblance to the indebtedness under scrutiny in
this case. Here, depending on the circumstances, petitioner could
have been required to satisfy all or part of the Miller/Huntington
Loan, even if MMS ceased making payments to him under the
MMS/Miller Loan. We accordingly conclude that petitioners were at
risk within the meaning of section 465 with respect to the amounts
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