Instructions For Form 6198 - At-Risk Limitations (Page 6 of 8) in pdf

property used in the activity, or to

must reduce the total of the adjusted

the effective date. Income from the

activity includes gain recognized under

acquire your interest in the activity.

basis of all the property you contributed

section 357(c) on contributions of

Generally, the net FMV is determined

by the total of all liabilities the property

property to the activity. Include all

when the property is pledged as

was subject to. This applies whether

distributions you received from the

security for the loan.

the corporation took the property

activity as well as your share of the

subject to, or assumed, the liabilities.

Do not enter the net FMV if (a) the

activity’s taxable income.

3. Loans for which you are

nonrecourse loan was from a person

5. Gain recognized on the transfer

personally liable that were used to

who has an interest in the activity other

or disposition of all or part of the activity

finance the activity, to acquire property

than as a creditor or who is related

or of your interest in the activity since

used in the activity, or to acquire your

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

the effective date.

interest in the activity and qualified

(except you) having such an interest,

6. Amounts you included in income

nonrecourse financing (defined on page

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

since the effective date because your

1). Do not enter amounts included in (2)

through (5) (or (6) for amounts

amount at risk was less than zero.

above.

borrowed after May 3, 2004) under

7. All money from outside the

At-Risk Activities on page 1. However,

4. Total net income from this activity

activity used since the effective date to

(a) does not apply to amounts

since the effective date (excess of all

repay loans included on lines 14 and

borrowed by a corporation from a

items of income received or accrued

18. If, however, you used your own

over the allowable deductions). Do not

person whose only interest in the

assets to repay a nonrecourse debt and

enter any amount less than zero. Do

activity is as a shareholder of the

you included an amount in (1)

corporation. See Pub. 925 for

not include the current year income or

beginning on page 5, the amounts

gains.

definitions.

included as repayments cannot exceed

2. Cash and the adjusted basis of

If you are not an S corporation

the amount by which the balance of the

other property contributed to the activity

shareholder, enter the total net income

loan at the time of repayment exceeds

since the effective date. Adjusted basis

from the activity since the effective

the net FMV of property you own (not

is the basis that would be used to figure

date, taking into account only those

used in the activity) that secures the

the loss if the property was sold

years the activity had net income. For

debt.

immediately after you contributed it to

years since the effective date that the

8. Percentage depletion deducted in

the activity. See Pub. 551 for details.

activity had a net loss, see the

excess of the adjusted basis of the

instructions for line 18, item (5), on

If you are an S corporation

depletable property for the activity since

page 7.

shareholder and you contributed

the effective date. Use the Line 16

property to the corporation subject to a

If you are an S corporation

Worksheet on page 7 to figure this

liability, including a liability you are

shareholder, enter your total net income

amount. Be sure to include the amount

personally required to repay, then you

from the activity for profit years since

for the current year.

Line 12 Worksheet—Figure Your Total Losses From Years

Before the Effective Date for Which There Were Equal or

Greater Amounts Not At Risk at Year End

Keep for Your Records

(a)

(b)

(c)

(d)

(e)

(f)

Year

Amount of loss for the

Amount not at risk at

Total amounts from

Subtract (d) from (c)

Smaller of (b) or (e)

year

end of year

column (f) for all prior

years

Total (include on Form 6198, line 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Worksheet Instructions

Use the first line of the worksheet for the first year in which you had a loss and amounts not at risk. List each subsequent year in order.

Column (d). For each year after the first year, enter the total amount in column (f) for all prior years.

Example. John had losses in 1970, 1971, and 1975. At the end of each of those years, John had outstanding amounts not at risk of $1,000. John had losses

of $500 in 1970, $300 in 1971, and $500 in 1975.

For 1970, John enters $500 in column (b), $1,000 in column (c), $1,000 in column (e), and $500 in column (f).

For 1971, John enters $300 in column (b), $1,000 in column (c), $500 in column (d) (the total amount from column (f) for all prior years),

$500 in column (e), and $300 in column (f).

For 1975, John enters $500 in column (b), $1,000 in column (c), $800 in column (d) (the total amount from column (f) for all prior years

($500 + $300)), $200 in column (e), and $200 in column (f). Of the $500 loss for 1975, only $200 is a loss for which there was an equal or

greater amount not at risk at year end.

John’s total loss from years before the effective date for which there were equal or greater amounts not at risk at year end is $1,000 (the

total of the amounts in column (f)).

-6-

Instructions For Form 6198 - At-Risk Limitations Page 6

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