Hubert Enterprises, Incorporated, Successor By Merger To Hubert Holding Company - Page 13




                                        -13-                                          
          worst case scenario.  See also Pritchett v. Commissioner, 827               
          F.2d 644, 647 (9th Cir. 1987) (a taxpayer is not at risk if the             
          taxpayer’s obligation to repay borrowed funds is contingent),               
          revg. on other grounds 85 T.C. 580 (1985).  Under this test, if a           
          taxpayer is a payor of last resort, then the taxpayer is at risk            
          for the purpose of section 465(b).                                          
               In determining whether the taxpayers in Emershaw v.                    
          Commissioner, supra, were payors of last resort, the Court of               
          Appeals for the Sixth Circuit initially referenced a Tax Court              
          Opinion stating that whether a taxpayer is at risk for purposes             
          of section 465(b) “‘must be resolved on the basis of who                    
          realistically will be the payor of last resort if the transaction           
          goes sour and the secured property associated with the                      
          transaction is not adequate to pay off the debt.’”  Id. at 845              
          (quoting Levy v. Commissioner, 91 T.C. 838, 869 (1988)).  The               
          Court of Appeals gave detailed consideration to the                         
          Commissioner’s argument that the taxpayers’ investment could not            
          be at risk because there was not a realistic possibility that the           
          taxpayers would ever be called upon to make payments on the debt.           
          Id.  The court dismissed that argument as unpersuasive and found            
          that the taxpayers were at risk because they could ultimately be            
          required to make payment.  Id. at 850.  The court concluded that            
          the taxpayers were payors of last resort because they might have            
          to pay the debt.                                                            







Page:  Previous  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  Next 

Last modified: March 27, 2008