Instructions For Form 6198 - At-Risk Limitations (Page 4 of 8) in pdf

included as repayments cannot be

(less nonrecourse liabilities to which the

of the first tax year beginning after

more than the amount by which the

noncash items are subject) — including

1978.

balance of the loan at the time of

assets used in the activity to repay

If you are a partner or an S

repayment exceeds the net FMV of

certain debts.

corporation shareholder, the date you

property you own (not used in the

5. Nonrecourse liabilities included

became a partner or shareholder may

activity) that secures the debt.

on line 6 of property you contributed to

determine whether you are subject to

3. Loans used to finance the

the activity.

the at-risk rules.

activity, to acquire property used in the

activity, or to acquire your interest in

Line 11

Line 10b

the activity for which you are personally

liable, and qualified nonrecourse

Investment in the Activity at the

Amount At Risk

financing (defined on page 1). Do not

Effective Date

If the amount on this line is smaller than

enter amounts included in (2) on page

your overall loss from the activity (line

Taxpayers other than partners or

3 or on line 6.

S corporation shareholders. Use the

5), you may want to complete Part III to

4. Percentage depletion for this year

Line 11 Worksheet and its instructions

see if Part III gives you a larger amount

deducted in excess of the adjusted

on page 5 to figure your investment in

at risk.

basis of depletable property for the

the activity at the effective date. Enter

activity.

If the amount on line 10b is

all amounts as of the effective date.

zero, you may be subject to the

Partners and S corporation

Line 9

recapture rules. See Pub. 925.

CAUTION

shareholders. Enter on line 11 the

basis of your investment in the

Decreases for the Tax Year

Part III—Detailed

partnership or S corporation at the

Do not include the current year

effective date. If the partnership or S

Computation of Amount

deductions or losses shown on lines 1

corporation is engaged in both at-risk

through 4.

At Risk

and not-at-risk activities, allocate your

investment between the at-risk and

Include changes during the current

If you completed Part III of Form 6198

not-at-risk activities. Enter the part that

tax year in amounts that decrease your

for this activity for the prior tax year,

is allocable to the at-risk activity on line

amount at risk, such as the following.

skip lines 11 through 14. Then, see the

11.

1. Nonrecourse loans (including

instructions for lines 15 and 16 that

recourse loans changed to nonrecourse

begin on page 5, and the instructions

Line 12

loans) other than qualified nonrecourse

for line 18 on page 7, to determine the

financing (defined on page 1) used to

amounts to enter on those lines.

Increases at Effective Date

finance the activity, to acquire property

If the activity began on or after one

Enter your share of amounts such as

used in the activity, or to acquire your

of the effective dates shown below and

the following.

interest in the activity. Only amounts

you did not complete Part III of Form

1. Net FMV of your own property

included on line 6 can be entered on

6198 for this activity for the prior tax

(not used in the activity) that secures

line 9.

year, skip lines 11 through 14. Enter -0-

nonrecourse loans used to finance the

2. Cash, property, or borrowed

on line 15 and complete the rest of Part

activity, to acquire property used in the

amounts protected against loss by a

III.

activity, or to acquire your interest in

guarantee, stop-loss agreement, or

the activity that will be included on line

other similar arrangement. Enter this

Effective Dates

14. Generally, the net FMV is

amount only if it was included on line 6.

Generally, the effective date is the first

determined when the property is

Do not include items covered by

day of the first tax year beginning after

pledged as security for a loan.

casualty insurance or insurance against

1975 if the activity is described in (1)

tort liability.

Do not enter the net FMV if (a) the

through (4) under At-Risk Activities on

3. Amounts borrowed from a person

nonrecourse loan was from a person

page 1.

who has an interest in the activity other

than as a creditor or who is related

If the activity is described in (5)

than as a creditor or who is related

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

under At-Risk Activities on page 1, the

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

(except you) having such an interest.

effective date is usually October 1,

(except you) having such an interest,

This does not apply to (a) amounts

1978, for wells started after September

and (b) the activity is described in (1)

borrowed by a corporation from a

30, 1978. Generally, a well started

through (5) under At-Risk Activities on

person whose only interest in the

before October 1, 1978, is not subject

page 1. However, (a) does not apply to

activity is as a shareholder of the

to the at-risk rules.

amounts borrowed by a corporation

corporation, or (b) amounts borrowed

from a person whose only interest in

The activity of holding real property

after May 3, 2004, and secured by real

the activity is as a shareholder of the

is subject to the at-risk rules for

property used in the activity of holding

corporation. See Pub. 925 for

property placed in service after 1986,

real property (other than mineral

definitions. If the activity is described in

and for an interest acquired after 1986

property) that, if nonrecourse, would be

(6) under At-Risk Activities on page 1,

in an S corporation, partnership, or

qualified nonrecourse financing. Enter

you can include these amounts.

other pass-through entity engaged in

these amounts only if they were

2. Total losses from years before

an activity of holding real property. An

included on line 6 and not included

the effective date for which there were

activity of holding real property does

under (1) or (2) above. This applies

equal or greater amounts not at risk at

not include the holding of mineral

only to activities described in (1)

year end. Use the Line 12 Worksheet

property. Holding mineral property may

through (5) under At-Risk Activities on

and its instructions on page 6 to figure

be subject to at-risk limitations other

page 1. See Pub. 925 for definitions

this amount.

than the special rules that apply to

and more details.

activities of holding real property.

4. Withdrawals and distributions

Make all entries on a year-by-year

during the tax year — both cash and

In most cases, the effective date for

basis. Include amounts only for years

the adjusted basis of noncash items

all other at-risk activities is the first day

before the effective date. Do not

-4-

Instructions For Form 6198 - At-Risk Limitations Page 4

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