at-risk rule

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 rule

A law that limits tax write-offs to the amount of money directly invested (and thus, at risk) in an asset. The purpose of an at-risk rule is to prohibit investors from deriving tax benefits that exceed the amount of money actually invested.

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References in periodicals archive ?

To ice the cake, we should impose an at-risk rule, which states that an investor can't write off losses on money for which he is not personally liable, such as the non-recourse loans that multiply McGovern's deductions.

Essentials of tax reform

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.

TEI liaison meeting with Canada Revenue Agency on income tax questions

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.

Chapter 17: Passive activities and at-risk rules

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.

A new corporate tax relief bill: highlights from the American Jobs Creation Act of 2004

The second limitation that may limit the current use of losses is the at-risk rules of IRC section 465.

Partnerships, LLCs, LLPs, and S corporations

Specifically the AMT, passive activity losses, and the at-risk rules were judged to be the most complex.

Issues in Federal Income Tax Complexity

NAA/NMHC/ASHA have long urged the repeal of the overly-complicated at-risk rules arguing they are no longer needed.

APARTMENT INDUSTRY PRAISES HOUSE TAX RELIEF LEGISLATION AS A SIGNIFICANT STEP FORWARD

In addition, the at-risk rules were extended to real estate.

Tax consequences of solution transactions

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.

The effects of tax reform on real estate: some empirical results

The second difference between passive losses and credits is that the at-risk rules apply only to losses but not to credits.

Passive activity credit flowchart

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.

Managing S corporation at-risk loss limitations: grouping or QSub elections can maximize loss recognition

13) The at-risk rules are covered in detail in Chapter 17, Passive Activity and At-Risk Rules.