Jerry E. Pritchett and Patricia D. Pritchett v. Commissioner of Internal Revenue Service

SKOPIL, Circuit Judge:

We must decide in this case whether taxpayers, limited partners in five similar partnerships engaged in oil and gas drilling operations, were “at risk” pursuant to 26 U.S.C. § 465 on certain recourse notes and thus entitled to deduct distributive shares of non-cash partnership losses. The Tax Court in a reviewed, split decision held that each taxpayer was at risk only to the extent of actual cash contribution. Pritchett v. Commissioner, 85 T.C. 580 (1985). We reject the Tax Court’s rationale in holding that taxpayers were not at risk on the recourse debt. We remand to…