at-risk rules

At-Risk Rule

In tax law, a rule disallowing investors from deducting more investment money from their taxable income than they have actually invested. For example, if one places $10,000 in a stock and would otherwise derive $15,000 in tax deductions from the investment, the at-risk rule only allows the investor to deduct $10,000. The rule exists to prevent a person from investing in a way that avoids taxes excessively.

at-risk rules

IRS rules limiting the deductibility of some losses, which are not allowed to exceed the amount the taxpayer has at risk,meaning the total of cash contributions and liability on promissory notes.Under certain circumstances,nonrecourse loans secured by real property but not by the individual's guarantee or endorsement may still satisfy the at-risk rules.(For more guidance,go to IRS Web site and download IRS Publication 925,“Passive Activity and At Risk Rules.”)

At-Risk Rules

Special rules limiting the taxpayer's deductible business, partnership, S corporation, or real estate loss to cash invested plus debt he or she is legally obligated to pay and the adjusted basis of any property contributed.
References in periodicals archive ?
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 passive activities and at-risk rules provide hurdles that taxpayers must overcome in order for certain losses to offset other sources of income in a given year.
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.
The second limitation that may limit the current use of losses is the at-risk rules of IRC section 465.
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.
The 1976 TRA at-risk rules applied to non-real estate tax shelters increase the value of both REITs and real estate corporations relative to entities holding non-real estate tax shelter assets.
At-risk rules apply to almost all other investments; they should apply to real estate as well.
The second difference between passive losses and credits is that the at-risk rules apply only to losses but not to credits.
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.
13) The at-risk rules are covered in detail in Chapter 17, Passive Activity and At-Risk Rules.