Instructions For Form 6198 - At-Risk Limitations printable pdf download

Department of the Treasury

Instructions for Form 6198

Internal Revenue Service

(Rev. November 2009)

At-Risk Limitations

Section references are to the Internal

Certain equipment leasing

property used in the activity of holding

activities by closely held C

real property (other than mineral

Revenue Code unless otherwise noted.

corporations are not subject to

property) that, if nonrecourse, would be

CAUTION

General Instructions

the at-risk rules. See sections

qualified nonrecourse financing. See

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

Pub. 925 for definitions.

4. Any cash or property contributed

4. Exploring for or exploiting oil and

Purpose of Form

to the activity or to your interest in the

gas resources.

Use Form 6198 to figure:

activity that is:

5. Exploring for or exploiting

•

The profit (loss) from an at-risk

a. Financed through nonrecourse

geothermal deposits as defined in

activity for the current year

indebtedness or protected against loss

section 613(e)(2).

(Part I).

through a guarantee, stop-loss

•

6. Any other activity that is not

The amount at risk for the current

agreement, or other similar

included in (1) through (5) above.

year (Part II or Part III).

arrangement, or

•

Exception. Holding real property

b. Borrowed from a person who has

The deductible loss for the current

placed in service before 1987 and

an interest in the activity other than as

year (Part IV).

holding an interest acquired before

a creditor or who is related under

1987 in a partnership, an S corporation,

The at-risk rules of section 465 limit

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

or other pass-through entity already

(except you) having such an interest.

the amount of the loss you can deduct

engaged in an activity of holding real

to the amount at risk.

However, this does not apply to (i)

property before 1987 are not affected

amounts borrowed by a corporation

For more details, see Pub. 925,

by the at-risk rules. This exception does

from a person whose only interest in

Passive Activity and At-Risk Rules.

not apply to holding mineral property.

the activity is as a shareholder of the

corporation, or (ii) amounts borrowed

A special exception to the at-risk

Who Must File

after May 3, 2004, and secured by real

rules applies to a qualifying

property used in the activity of holding

business of a qualified C

Form 6198 is filed by individuals

CAUTION

real property (other than mineral

corporation. See Pub. 925 for details.

(including filers of Schedules C, E, and

property) that, if nonrecourse, would be

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

qualified nonrecourse financing. See

Amounts Not at Risk

certain closely held C corporations

Pub. 925 for definitions.

described in section 465(a)(1)(B),

You are not considered at risk for any

as modified by section 465(a)(3).

of the following.

You do not have to file Form 6198 if

you are engaged in an activity included

1. Nonrecourse loans used to

File Form 6198 if during the tax year

in (6) under At-Risk Activities and you

finance the activity, to acquire property

you, a partnership in which you were a

only have amounts borrowed before

used in the activity, or to acquire your

partner, or an S corporation in which

May 4, 2004, that are described in (3)

interest in the activity (unless the

you were a shareholder had any

under Amounts Not at Risk.

nonrecourse loan is secured by your

amounts not at risk (see Amounts Not

own property that is not used in the

at Risk later) invested in an at-risk

Qualified Nonrecourse

activity). However, you are considered

activity (defined below) that incurred a

Financing

at risk for qualified nonrecourse

loss.

financing secured by real property used

Qualified nonrecourse financing is

in the activity of holding real property

You must file Form 6198 if you are

financing for which no one is personally

(other than mineral property). See

engaged in an activity included in (6)

liable for repayment and is:

•

Qualified Nonrecourse Financing.

under At-Risk Activities (see At-Risk

Borrowed by you in connection with

2. Cash, property, or borrowed

Activities below) and you have

holding real property,

•

amounts used in the activity that are

borrowed amounts described in (3)

Secured by real property used in the

protected against loss by a guarantee,

under Amounts Not at Risk (see

activity,

•

stop-loss agreement, or other similar

Amounts Not at Risk later).

Not convertible debt, and

•

arrangement (excluding casualty

Loaned or guaranteed by any

insurance and insurance against tort

federal, state, or local government, or

At-Risk Activities

liability).

borrowed by you from a qualified

3. Amounts borrowed for use in the

person (defined below).

The at-risk limitation rules apply to

activity from a person who has an

losses from the following activities

See Regulations section 1.465-27

interest in the activity other than as a

carried on as a trade or business or for

for details, including rules for

creditor or who is related under section

the production of income.

partnership liabilities and disregarded

465(b)(3)(C) to a person (except you)

entities. This section is effective for any

1. Holding, producing, or distributing

having such an interest. However, this

motion picture films or video tapes.

financing incurred on or after August 4,

does not apply to (a) amounts

1998, but taxpayers can apply the

2. Farming as defined in

borrowed by a corporation from a

section retroactively.

section 464(e)(1).

person whose only interest in the

3. Leasing any section 1245

activity is as a shareholder of the

A qualified person is a person who

property as defined in

corporation, or (b) amounts borrowed

actively and regularly engages in the

section 1245(a)(3).

after May 3, 2004, and secured by real

business of lending money (for

Cat. No. 50013J

Instructions For Form 6198 - At-Risk Limitations

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