The IRS has concluded in a legal memorandum (ILM 2013-08-028)
that an individual's guarantee was an amount at-risk for
purposes of Section 465.
The facts presented in the ILM provided that an individual (T)
was the sole owner of a limited liability company (X), which was
disregarded from its owner for federal tax purposes (a DRE). X then
directly owned another limited liability company (Y), which was
also a DRE. In addition, T directly owned two S corporations (M and
N). In Year 1, Y borrowed cash (the debt) from an unrelated lender
for its business. Under the debt agreement with the lender, T, X, M
and N each guaranteed the payment of X's debt to the bank.
Also in Year 1, T entered into a separate agreement to
personally guarantee the debt (the personal guaranty). Under the
personal guaranty, T absolutely and unconditionally guaranteed full
repayment of the debt, and T did not waive his rights of
subrogation and reimbursement against Y, or his rights
