                        T.C. Memo. 2010-156



                      UNITED STATES TAX COURT



ESTATE OF KEITH K. ROBERTS, DECEASED, JANE A. ROBERTS, SURVIVING
           SPOUSE AND JANE A. ROBERTS, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5513-06.               Filed July 21, 2010.



     Kevin M. Sullivan, for petitioners.

     Anita A. Gill, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     GOEKE, Judge:   Respondent determined deficiencies in the

joint income tax of Keith Roberts and Jane Roberts for the tax

years 1996 through 1998 and 2001 through 2003.   The sole issue

for decision is whether Keith Roberts may increase his at-risk

amount in his single member limited liability company (LLC) under
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section 465.1   For the reasons stated herein, we conclude that no

such increase is allowable.

                           FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the accompanying exhibits are

incorporated herein by this reference.    At the time the petition

was filed, Jane Roberts (hereinafter Mrs. Roberts) resided in

Indiana.    Keith Roberts (hereinafter Mr. Roberts) passed away

before the petition was filed.

     In April 2001 Mr. Roberts filed articles of organization

under Indiana law for “CTI Leasing LLC” and became its sole

member.    For Federal tax purposes CTI Leasing LLC was a

disregarded entity.

     Mrs. Roberts owned no interest in CTI Leasing LLC but filed

joint returns with Mr. Roberts for the years at issue.      She is

the surviving spouse of Mr. Roberts and the personal

representative of his estate.

     CTI Leasing LLC was created for the purpose of leasing

transportation equipment to a related entity, Central Trucking,

Inc. (Central Trucking).    Central Trucking was an S corporation

of which Mr. Roberts was sole shareholder.    Under a lease



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect during the years at issue,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
                                - 3 -

agreement between CTI Leasing LLC and Central Trucking, all

transportation equipment owned by CTI Leasing LLC was leased to

Central Trucking.   In return Central Trucking was obligated to

pay CTI Leasing LLC the principal and interest financing cost for

each unit plus $25 per month.

     On October 21, 2002, Mr. Roberts lent CTI Leasing LLC

$425,000.   The following day he received back a promissory note

in that amount.   CTI Leasing LLC then used the $425,000 to

purchase a cashier’s check in the same amount.   The cashier’s

check was used toward the purchase of a 2003 Vantare H3-45 Super

S2 RV (RV) for $1,392,714.   Vantare RVs are custom-built, fully

furnished, luxury coach RVs known for their “yacht quality fit

and finish”.

     The RV was purchased on October 31, 2002.   The name on the

purchase documents was “Keith Roberts, DBA CTI Leasing” and title

was in the name of “CTI Leasing”.   “CTI Leasing” was not a

registered business entity in the State of Indiana.   “CTI Leasing

LLC” did not operate under the name “CTI Leasing”.

     Central Trucking’s employer identification number (EIN) was

on the purchase documents for the RV.   Central Trucking and CTI

Leasing LLC were listed with separate EINs on Mr. Roberts’ Form

W-2, Wage and Tax Statement, and on the Form 1040, U.S.

Individual Income Tax Return, of Mr. and Mrs. Roberts for 2001.
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     The Internal Revenue Service (IRS) conducted an audit of Mr.

Roberts’ income tax returns from June 2003 through November 2004.

During the audit the IRS was able to interview representatives of

CTI Leasing LLC multiple times.   CTI Leasing LLC representatives

also supplied a multitude of business documents to the IRS.

     During the audit representatives of CTI Leasing LLC reported

no outstanding loans from Mr. Roberts to CTI Leasing LLC.        One

loan for $77,000 payable to the shareholder did exist at the

close of 2001; however, this reflected a loan that was actually

from Central Trucking to CTI Leasing LLC, which was paid off a

few months after the end of 2001.    The representatives never

reported that CTI Leasing LLC owned the RV.        In addition, the

2002 depreciation schedule for CTI Leasing LLC does not list the

purchase of such an asset in 2002.      No evidence was introduced at

trial that the RV was included in the lease between CTI Leasing

LLC and Central Trucking.

     On December 16, 2005, respondent issued a notice of

deficiency to Mrs. Roberts.   Mr. Roberts had passed away by that

date.   Respondent determined the following deficiencies:

                Year                   Deficiency

                1996                    $206,753
                1997                     585,923
                1998                     154,992
                2001                     329,151
                2002                     321,860
                2003                     228,186
                                 - 5 -

Petitioners timely petitioned this Court contesting respondent’s

determination.   A trial was held in Indianapolis, Indiana.

      Before trial petitioners and respondent settled most of the

issues in dispute; however, they still disagree whether Mr.

Roberts was entitled to increase his amount at risk in CTI

Leasing LLC as a result of his $425,000 loan.      This is the sole

issue remaining for our consideration.

                                OPINION

I.   Section 465 in General

     Section 465(c)(1)(C) provides that the section 465 at-risk

rules apply to taxpayers engaged in the activity of leasing

section 1245 property.   The transportation equipment CTI Leasing

LLC leased to Central Trucking was section 1245 property under

section 1245(a)(3).   Therefore, the section 465 at-risk rules

apply in this case.

     Section 465(a) limits the losses a taxpayer may deduct with

respect to a particular activity to the “aggregate amount with

respect to which the taxpayer is at risk * * * for such

activity”.   Alexander v. Commissioner, 95 T.C. 467, 469 (1990),

affd. without published opinion sub nom. Stell v. Commissioner,

999 F.2d 544 (9th Cir. 1993).    A taxpayer’s amount at risk

includes the amount of money and the bases of property

contributed to an activity.   Sec. 465(b)(1)(A).    The amount at

risk also includes amounts borrowed with respect to such
                                  - 6 -

activity.    Sec. 465(b)(1)(B).   Pursuant to section 465(b)(2)(A),

amounts borrowed with respect to an activity include “amounts

borrowed for use in an activity to the extent that * * * [the

taxpayer] is personally liable for the repayment of such

amounts.”    Notwithstanding the foregoing provisions, a taxpayer's

amount at risk does not include amounts protected against loss

through nonrecourse financing, guaranties, stop loss agreements,

or other similar arrangements.     Sec. 465(b)(4).

II.    Burden of Proof

       Generally, taxpayers bear the burden of proving, by a

preponderance of the evidence, that the determinations of the

Commissioner in a notice of deficiency are incorrect.    Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); Griffin v.

Commissioner, 315 F.3d 1017, 1021 (8th Cir. 2003), vacating T.C.

Memo. 2002-6.    Petitioners do not argue that section 7491 causes

the burden of proof to shift to respondent, and they have not

established that they meet the requirements of section

7491(a)(2)(A) and (B).

III.   Arguments of the Parties

       Respondent argues that section 465(b) precludes Mr. Roberts

from increasing his amount at risk in CTI Leasing LLC as a result

of the $425,000 loan as the LLC was a disregarded entity not
                                - 7 -

separate from him for tax purposes.     Respondent also contends

that the Mr. Roberts personally owned and used the RV and that

the $425,000 was therefore not includable as an amount at risk.

      Petitioners argue that CTI Leasing LLC in fact owned and

used the RV and therefore Mr. Roberts’ amount at risk was

properly increased under section 465.     Petitioners also contend

that the $425,000 was a capital contribution rather than a loan

for purposes of section 465.

IV.   Ownership and Use of the RV

      As stated previously, respondent claims that CTI Leasing LLC

did not own or use the RV but that Mr. Roberts owned and used it

personally.   Respondent argues that if CTI Leasing LLC did not

own or use the RV, then Mr. Roberts did not contribute any amount

to CTI Leasing LLC or lend any amount for CTI Leasing LLC’s use

and therefore would not be able to increase his amount at risk in

the activity under section 465(b)(1)(A) and (2).

      Petitioners contend the RV was in fact a business asset

owned and used by CTI Leasing LLC and that Mr. Roberts’ amount at

risk in CTI Leasing LLC was therefore properly increased under

section 465(b)(1)(A) and (2).
                               - 8 -

     A.   No Indication of Ownership of RV by CTI Leasing LLC

     The 2002 depreciation schedule for CTI Leasing LLC does not

list the purchase of a Vantare RV in 2002.   CTI Leasing LLC’s

failure to list the RV on its depreciation schedule is evidence

that it was not the true owner of the RV.

     Additionally, during the IRS audit of Mr. Roberts’ returns,

neither Mr. Roberts nor representatives of CTI Leasing LLC ever

reported ownership of a Vantare RV by CTI Leasing LLC.    CTI

Leasing LLC representatives also stated that it had no

outstanding loans from Mr. Roberts at the end of 2002.    This is

evidence that the RV was purchased with the personal funds of Mr.

Roberts and was not intended for use by CTI Leasing LLC.

     B.   Title of RV Recorded in Name of “CTI Leasing”

     Mr. Roberts recorded the title of the RV under the name “CTI

Leasing” and signed the bill of sale as “Keith Roberts DBA CTI

Leasing”.   Petitioners argue this is evidence that CTI Leasing

LLC is the owner of the RV.   However, petitioners produced no

evidence that “CTI Leasing LLC” did business as “CTI Leasing”.

Standing alone, the similarity between “CTI Leasing LLC” and “CTI

Leasing” is not conclusive, as it is possible CTI Leasing could

be a separate business from CTI Leasing LLC.   See, e.g.,

Loewen-Am., Inc. v. Advance Distrib. Co., No. 79-1230C(2), 1981

U.S. Dist. LEXIS 17745, at *2 (E.D. Mo. Nov. 23, 1981) (“‘Advance

Distributing Company’ and ‘Advance Distributing Company, Inc.’
                               - 9 -

are separate entities.”); see also Clarke Auto Co. v. Fyffe, 116

N.E.2d 532, 534 (Ind. Ct. App. 1954) (Clarke Auto Co., Inc. “was

an Indiana corporation organized in 1946 * * * there was another

Indiana corporation organized in 1949 known as Clarke Auto Co. of

Indiana, Inc.”).

     State law determines the requirements an entity must meet to

act under a “doing business as” (d.b.a.) name.   See, e.g., Pro

Edge, L.P. v. Gue, 374 F. Supp. 2d 711, 744 (N.D. Iowa 2005)

(Federal court looks to State law to determine whether use of a

fictitious business name was proper.).   “CTI Leasing LLC” was the

name on the articles of organization.    Ind. Code Ann. sec. 23-15-

1-1(e)(5) (LexisNexis Supp. 2009) provides that if an LLC wishes

to do business under a name other than the name on its articles

of organization, the LLC must file a certificate stating the

assumed name with the Indiana secretary of state.

     Petitioners produced no evidence that CTI Leasing LLC was

authorized by the Indiana secretary of state to do business as

“CTI Leasing”.   Nor have petitioners produced any other evidence

that CTI Leasing LLC has ever done business as “CTI Leasing”.

     We must however consider the fact that “CTI Leasing” might

have sufficed as a shorthand reference in the mind of Mr. Roberts

at the time he made out the title and the bill of sale.   In the

light of the above facts, we find the fact that “CTI Leasing” was
                                - 10 -

on the title and bill of sale only slightly favors petitioners’

ownership argument.

       C.   Use of Central Trucking’s EIN on the RV Title

       CTI Leasing LLC and Central Trucking each had an individual

EIN.    Mr. Roberts put Central Trucking’s EIN on the RV title.

Respondent argues this is evidence that CTI Leasing LLC was not

the owner of the RV.     Petitioners contend that CTI Leasing LLC

was not required to have an EIN, and therefore the fact that CTI

Leasing LLC’s EIN was not on the title is not evidence of

ownership by an entity other than CTI Leasing LLC.

       Petitioners are correct that CTI Leasing LLC, being a

single-member disregarded entity, was not required to have and/or

use an EIN.     See sec. 301.6109-1(h)(2)(i), Proced. & Admin. Regs.

However, that section provides:     “a single owner entity that is

disregarded as an entity separate from its owner * * * must use

its owner’s taxpayer identifying number (TIN) for federal tax

purposes.”     Because CTI Leasing LLC was a disregarded entity, it

would have been required to use Mr. Roberts’ TIN for Federal tax

purposes.

       We find no support for the proposition that there is a

Federal tax purpose in putting a TIN/EIN on title to a vehicle.

One possible argument for the proposition could be that ownership

of the RV would determine which entity would be permitted to

claim depreciation deductions from Federal income tax under
                               - 11 -

section 167.    Arevalo v. Commissioner, 124 T.C. 244, 251-252

(2005), affd. 469 F.3d 436 (5th Cir. 2006); Travelers Ins. Co. v.

St. Jude Hosp., Nos. 90-1983, 90-2601, 1992 WL 364999 (E.D. La.

Nov. 24, 1992).    However, “Depreciation deductions are based on

an investment in and actual ownership of property rather than the

possession of bare legal title.”    Arevalo v. Commissioner, supra

at 252 (citing Grant Creek Water Works, Ltd. v. Commissioner, 91

T.C. 322, 326 (1988)).   It follows that for Federal tax

depreciation purposes the EIN/TIN on the RV title will not

determine which entity may claim depreciation for the RV.    We

find no Federal tax purpose in the TIN/EIN on a vehicle title.

     As no Federal tax purpose existed, section 301.6109-

1(h)(2)(i), Proced. & Admin. Regs., did not require Mr. Roberts

to put his own TIN on the RV title if CTI Leasing LLC was the

owner.    Additionally, we can find no support for the proposition

that a TIN/EIN on a title is evidence of ownership when no

specific TIN/EIN was required.   Therefore, we find that putting

of Central Trucking’s EIN on the RV title is a neutral factor

when considering ownership of the RV.

     D.   Use of the RV by CTI Leasing LLC

     Petitioners claim that the RV was leased to Central Trucking

pursuant to the lease agreement between CTI Leasing LLC and

Central Trucking and was therefore used by CTI Leasing LLC.
                              - 12 -

     Petitioners, however, introduced no evidence that the RV was

included in the lease or that the RV was used by CTI Leasing LLC

for any purpose.   Petitioners having failed to introduce any

probative evidence that the RV was included in the lease or used

by CTI Leasing LLC in any way, we find that petitioners’ claims

regarding use of the RV are not sustainable.

     E.   Conclusion on Ownership and Use of the RV

      Considering the above arguments, we find that petitioners

have not met their burden of proving that CTI Leasing LLC owned

the RV.   Additionally, petitioners produced no probative evidence

regarding use of the RV.   Petitioners have therefore failed to

establish that the RV was used in the business of CTI Leasing LLC

and was not solely used by Mr. Roberts for personal use.

V.   Effect of the Loan on Amount at Risk

      Section 465(b)(1)(A) provides that a taxpayer is at risk for

amounts contributed “to the activity”.      Because we find CTI

Leasing LLC did not own or use the RV, we conclude the $425,000

was not contributed “to the activity” of CTI Leasing LLC.

      Section 465(b)(2) provides that a taxpayer is at risk for

amounts borrowed “for use in an activity”.      Because we find CTI

Leasing LLC did not use the RV, as part of the lease or

otherwise, we conclude the $425,000 was not borrowed “for use in

[the] activity” of CTI Leasing LLC.
                              - 13 -

      The $425,000 loan does not satisfy the requirements of

either section 465(b)(1)(A) or (2).    Therefore, Mr. Roberts was

not entitled to treat any of the $425,000 as an amount for which

he was at risk in CTI Leasing LLC under section 465.

      “The amount at risk is the amount of money the taxpayer has

invested in the business * * * that may actually be lost from the

activity.”   Oren v. Commissioner, 357 F.3d 854, 859 (8th Cir.

2004) (emphasis supplied), affg. T.C. Memo. 2002-172.      Because

petitioners have failed to establish the $425,000 was contributed

to or used in the business of CTI Leasing LLC, we find the

$425,000 is not considered an amount for which Mr. Roberts was at

risk.

VI.   Conclusion

      For the reasons discussed hereinabove, we find that Mr.

Roberts was not entitled to increase his amount at risk in CTI

Leasing LLC under section 465.   Accordingly, we sustain

respondent’s determination with respect to the issue.

      To reflect the foregoing and the settled issues,


                                           Decision will be entered

                                      under Rule 155.
