Preparing Your Tax Return(s) and Information Returns
Reporting Business Losses
Passive Activities and At Risk Rules
Generally, you are in a passive activity if you have a trade
or business activity in which you do not materially
participate during the tax year, or a rental activity. If
you have a loss, you must determine your amount at risk in the activity.
In general, you can deduct passive activity losses only from passive
activity income. You carry any excess loss forward to the following year or years until
used, or until deducted in the year you dispose of your entire interest in the activity in
a fully taxable transaction.
Form
6198 is used to figure:
- The current year profit (loss) from an at-risk activity
for 2000 (Part I).
- The amount at risk for 2000 (Part II or Part III).
- The deductible loss for 2000 (Part IV).
The at-risk rules of section 465 limit the loss you can deduct to
the amount of the loss or your amount at risk, whichever is less.
For more details, see Pub.925,
Passive Activity and At-Risk Rules.
Activities
that Are Not Passive Activities
AT-Risk
Limits
Note: Corporations subject to the passive activity rules
must use Form
8810, Corporate Passive Activity Loss and Credit Limitations.
Important References
Publication
925 Passive
Activity and At-Risk Rules
Form
8582
Passive Activity Loss Limitations
Instructions
Form 8582
Form
6198
At-Risk Limitations
Instructions
Form 6198
Form
8810
Corporate Passive Activity Loss and Credit Limitations