Instructions For Form 6198 - At-Risk Limitations

business of lending money (for

Each investment that is not a part

Part I. For example, if in 2002 your

example, a bank or savings and loan

of a trade or business is treated as a

Schedule K-1 had a $1,500 loss on

association).

separate activity.

line 1, but because of the at-risk rules

your loss was limited to $500, include

A qualified person is not:

both the $1,000 loss from 2002 and

•

A person related to you unless the

the amount from your 2003

Specific Instructions

person would be a qualified person

Schedule K-1 on line 1 of Form 6198.

but for the relationship and the

If you are engaged in more than one

Closely held corporations. A

nonrecourse financing is

at-risk activity or in both at-risk

closely held corporation must apply

commercially reasonable and on the

activities and not-at-risk activities, you

the limitation on the deduction for

same terms as loans to unrelated

must allocate income, gains, losses,

interest expense under section 163(j)

persons,

and deductions to each activity.

•

before applying the at-risk limitations.

The seller of the property (or a

Partnerships and S corporations

person related to the seller), or

Line 1

•

must give their partners and

A person who receives a fee as a

shareholders a separate statement of

result of your investment in the

Ordinary Income (Loss)

income, expenses, and deductions

property (or a person related to that

for each at-risk and not-at-risk

Taxpayers other than partners or

person).

activity.

S corporation shareholders. Enter

your ordinary income or loss from the

When filling in Parts I, II, and III,

Aggregation or

at-risk activity without regard to the

enter only amounts that relate to the

Separation of Activities

at-risk limitations. This is the amount

activity included on this form. Use

you get when you subtract your total

accepted tax accounting methods to

File one form if your activities are

deductions (including prior year

figure the amounts to enter.

listed under the aggregation rules.

deductions that were not allowed

If you are a partner or an S

File a separate form for each activity

because of the at-risk rules) from

corporation shareholder, enter any

if your activities are listed under the

your total income from the activity for

items for the activity that are from

separation rules.

the current year.

your investment in the activity or were

Aggregation rules. All section 1245

passed through to you on

Do not include on line 1 capital or

properties that are leased or held for

Schedule K-1 or a similar statement.

ordinary gains and losses from the

lease and placed in service in any tax

sale or other disposition of assets

Description of activity. After the

year of a partnership or an S

used in the activity or of an interest in

description of the activity, if

corporation are treated as one

the activity. These amounts, casualty

applicable, enter the name and

activity. A partner in a partnership or

or theft gains and losses, and

identifying number of the partnership

an S corporation shareholder can

investment interest expense are

or S corporation.

aggregate and treat as a single

entered on lines 2a, 2b, 2c, and 4.

activity all of the properties of that

Part I—Current Year

Partners and S corporation

partnership or S corporation that are

shareholders. Enter the amount

included within each of categories 1,

Profit (Loss) From the

from line 1 of your current year

2, 4, and 5 under At-Risk Activities

Activity, Including Prior

Schedule K-1 (Form 1065 or

on page 1.

Form 1120S) (plus any prior year loss

Year Nondeductible

from Schedule K-1, line 1, that you

Activities described in 6 under

Amounts

could not deduct because of the

At-Risk Activities on page 1 that

at-risk rules). In the case of a partner

constitute a trade or business are

Taxpayers other than partners or

in an electing large partnership, a

treated as one activity if (a) the

S corporation shareholders. If you

partner’s share of at-risk activity

taxpayer actively participates in the

have losses or deductions from an

income or loss may be reported on

management of that trade or

earlier tax year that you could not

line 1 or 2 of Schedule K-1

business or (b) the business is

deduct because of the at-risk rules,

(Form 1065-B), Partner’s Share of

carried on by a partnership or an S

include those amounts on the

Income (Loss) From an Electing

corporation and 65% or more of the

appropriate form or schedule of your

Large Partnership.

losses for the tax year are allocable

current year tax return before starting

to persons who actively participate in

Lines 2a, 2b, and 2c

Part I. For example, if in 2002 your

the management of the trade or

Schedule C had a $1,500 loss on

business. Similar rules apply to

Gain (Loss)

line 31, but because of the at-risk

activities described in 1 through 5

rules your loss was limited to $500,

Combine long- and short-term capital

under At-Risk Activities on page 1.

include the $1,000 on your 2003

gains and losses and ordinary gains

Schedule C in Part V, Other

Separation rules. Your activity with

and losses from the sale or other

Expenses, and identify it as a prior

respect to each film, video tape,

disposition of assets used in the

year loss.

section 1245 property that is leased

activity or of your interest in the

or held for lease, farm, holding of real

Partners and S corporation

activity. Enter gains and losses

property, oil and gas property (as

shareholders. If you have a loss or

without regard to the at-risk

defined in section 614), or geothermal

a deduction from an earlier tax year

limitations, the limitation on capital

property (as defined in section 614)

that you could not deduct because of

losses, or the passive activity loss

that is not aggregated with other

the at-risk rules, these losses and

limitations. If more than one item is

activities under the above rules is

deductions must be included in the

included on a line, attach a statement

treated as a separate activity.

current year amounts you enter in

describing each item.

-2-

Instructions For Form 6198 - At-Risk Limitations - 2003 Page 2

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