Instructions For Form 6198 - At-Risk Limitations

2 0

Department of the Treasury

Internal Revenue Service

Instructions for Form 6198

At-Risk Limitations

Section references are to the Internal Revenue Code unless otherwise noted.

4. Exploring for or exploiting oil

interest of a shareholder in the case

General Instructions

and gas resources.

of amounts borrowed by a

corporation from the shareholder.

5. Exploring for or exploiting

Purpose of Form

See Pub. 925 for definitions.

geothermal deposits as defined in

Use Form 6198 to figure:

4. Any cash or property

section 613(e)(2).

•

The current year profit (loss) from

contributed to the activity or to your

6. Any other activity that is not

an at-risk activity for 2003 (Part I).

interest in the activity that is:

•

included in 1 through 5 above.

The amount at risk for 2003 (Part II

Financed through nonrecourse

or Part III).

indebtedness or protected against

Exception. Holding real property

•

The deductible loss for 2003

loss through a guarantee, stop-loss

placed in service before 1987 and

(Part IV).

agreement, or other similar

holding an interest acquired before

arrangement or

1987 in a partnership, an S

The at-risk rules of section 465

•

corporation, or other pass-through

Borrowed from a person who

limit the amount of the loss you can

entity already engaged in an activity

has an interest in the activity other

deduct to the amount at risk.

of holding real property before 1987

than as a creditor or who is related

For more details, see Pub. 925,

are not affected by the at-risk rules.

under section 465(b)(3)(C) to a

Passive Activity and At-Risk Rules.

This exception does not apply to

person (except you) having such an

holding mineral property.

interest. However, this does not apply

Who Must File

to an interest of a shareholder in the

Note: A special exception to the

Form 6198 is filed by individuals

case of amounts borrowed by a

at-risk rules applies to a qualifying

(including filers of Schedules C, E,

corporation from the shareholder.

business of a qualified C corporation.

and F (Form 1040)), estates, trusts,

See Pub. 925 for definitions.

See Pub. 925 for details.

and certain closely held C

corporations described in

Amounts Not at Risk

You do not have to file Form 6198

section 465(a)(1)(B), as modified by

if you are engaged in an activity

You are not considered at risk for any

section 465(a)(3).

included in 6 under At-Risk

of the following.

Activities and you only have

File Form 6198 if during the tax

1. Nonrecourse loans used to

borrowed amounts described in 3

year you, a partnership in which you

finance the activity, to acquire

under Amounts Not at Risk.

were a partner, or an S corporation in

property used in the activity, or to

which you were a shareholder had

Qualified Nonrecourse

acquire your interest in the activity

any Amounts Not at Risk (see this

(unless the nonrecourse loan is

Financing

page) invested in an at-risk activity

secured by your own property that is

Qualified nonrecourse financing is

(defined below) that incurred a loss.

not used in the activity). However,

financing for which no one is

you are considered at risk for

personally liable for repayment and

At-Risk Activities

qualified nonrecourse financing

is:

secured by real property used in the

The at-risk limitation rules apply to

•

Borrowed by you in connection with

activity of holding real property (other

losses from the following activities

holding real property,

than mineral property). See Qualified

carried on as a trade or business or

•

Secured by real property used in

Nonrecourse Financing on this

for the production of income.

the activity,

page.

•

1. Holding, producing, or

Not convertible debt, and

•

2. Cash, property, or borrowed

distributing motion picture films or

Loaned or guaranteed by any

amounts used in the activity that are

video tapes.

Federal, state, or local government,

protected against loss by a

2. Farming as defined in

or borrowed by you from a qualified

guarantee, stop-loss agreement, or

person.

section 464(e)(1).

other similar arrangement (excluding

See Regulations section 1.465-27

3. Leasing any section 1245

casualty insurance and insurance

for details, including rules for

property, as defined in

against tort liability).

partnership liabilities and disregarded

section 1245(a)(3).

3. Amounts borrowed for use in

entities. This section is effective for

the activity from a person who has an

any financing incurred on or after

Certain equipment leasing

interest in the activity other than as a

August 4, 1998, but taxpayers can

activities by closely held C

creditor or who is related under

apply the section retroactively.

corporations are not subject to

section 465(b)(3)(C) to a person

CAUTION

the at-risk rules. See

(except you) having such an interest.

A qualified person is a person who

sections 465(c)(4), (5), and (6).

However, this does not apply to an

actively and regularly engages in the

Cat. No. 50013J

Instructions For Form 6198 - At-Risk Limitations - 2003

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