Under paragraph 111(1)(e) limited partnership losses that cannot be deducted against other sources of income because of the at-risk rules
can generally be carried forward indefinitely and claimed against future limited partnership income.
The at-risk rules
then limit his deductible loss to $6,000 (the amount not borrowed from a person who has an interest in the partnership).
A beneficiary of a qualified subchapter S trust may deduct suspended losses under the at-risk rules
and the passive loss rules when the trust disposes of the S corp stock.
Specifically the AMT, passive activity losses, and the at-risk rules
were judged to be the most complex.
NAA/NMHC/ASHA have long urged the repeal of the overly-complicated at-risk rules
arguing they are no longer needed.
In addition, the at-risk rules
were extended to real estate.
apply to almost all other investments; they should apply to real estate as well.
465 at-risk rules
are eligible for indefinite carryover (the same as losses suspended under the basis limitation rules).
Practitioners tend to focus on the first and last of these three and may overlook special provisions of the at-risk rules
that can allow some taxpayers to recognize more of their losses sooner.
Reasoning by analogy to the at-risk rules
of section 465, the court concluded that Peracchi was entitled to a step-up in basis to the extent of his risk of economic loss if the investment were to become unrecoverable.
One of the things he said that I thought was kind of interesting kind of went back to what fueled, in my opinion, a lot of the boom that occurred in the 80's - the tremendous tax advantages of real estate ownership and the at-risk rules
and things of this nature.
The at-risk rules
do not limit the deductibility of all deductible expenses arising from an activity; rather, they limit the deductibility of losses.