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Instructions for Form 6198

(Rev. December 2024)
At-Risk Limitations
For use with Form 6198 (Rev. November 2024) or later revision

Section references are to the Internal Revenue section 1245(a)(3). interest in the activity other than as a
Code unless otherwise noted. creditor or who is related under section
Certain equipment leasing 465(b)(3)(C) to a person (except you)
General Instructions ! activities by closely held C having such an interest. However, this
CAUTION corporations are not subject to does not apply to (a) amounts borrowed
Purpose of Form the at-risk rules. See sections 465(c)(4), by a corporation from a person whose
Use Form 6198 to figure: (5), and (6). only interest in the activity is as a
shareholder of the corporation, or (b)
• The profit (loss) from an at-risk 4. Exploring for or exploiting oil and amounts borrowed after May 3, 2004,
activity for the current year gas resources. and secured by real property used in the
(Part I),
• The amount at risk for the current 5. Exploring for or exploiting activity of holding real property (other
year (Part II or Part III), and geothermal deposits, as defined in than mineral property) that, if
• The deductible loss for the current section 613(e)(2). nonrecourse, would be qualified
year (Part IV). nonrecourse financing. See Pub. 925 for
6. Any other activity that is not definitions.
The at-risk rules of section 465 limit included in (1) through (5) above. 4. Any cash or property contributed
the amount of the loss you can deduct
to the activity or to your interest in the
to the amount at risk. Exception. Holding real property
activity that is:
For more details, see Pub. 925, placed in service before 1987 and
Passive Activity and At-Risk Rules. holding an interest acquired before 1987 a. Financed through nonrecourse
in a partnership, an S corporation, or indebtedness or protected against loss
Who Must File other pass-through entity already through a guarantee, stop-loss
Form 6198 is filed by individuals engaged in an activity of holding real agreement, or other similar
(including filers of Schedules C, E, and property before 1987 are not affected by arrangement; or
F (Form 1040 or 1040-SR)), estates, the at-risk rules. This exception does not b. Borrowed from a person who has
trusts, and certain closely held C apply to holding mineral property. an interest in the activity other than as a
corporations described in section 465(a) A special exception to the at-risk creditor or who is related under section
465(b)(3)(C) to a person (except you)
CAUTION business of a qualified C
(1)(B), as modified by section 465(a)(3). ! rules applies to a qualifying having such an interest. However, this
File Form 6198 if during the tax year corporation. See Pub. 925 for details. does not apply to (i) amounts borrowed
you, a partnership in which you were a by a corporation from a person whose
partner, or an S corporation in which you only interest in the activity is as a
were a shareholder had any amounts Amounts Not at Risk shareholder of the corporation, or (ii)
not at risk (see Amounts Not at Risk, You are not considered at risk for any of amounts borrowed after May 3, 2004,
later) invested in an at-risk activity the following. and secured by real property used in the
(defined below) that incurred a loss. 1. Nonrecourse loans used to activity of holding real property (other
finance the activity, to acquire property than mineral property) that, if
You must file Form 6198 if you are nonrecourse, would be qualified
used in the activity, or to acquire your
engaged in an activity included in (6) nonrecourse financing. See Pub. 925 for
interest in the activity (unless the
under At-Risk Activities (see At-Risk definitions.
nonrecourse loan is secured by your
Activities below) and you have borrowed
own property that is not used in the
amounts described in (3) under You do not have to file Form 6198 if
activity). However, you are considered
Amounts Not at Risk (see Amounts Not you are engaged in an activity included
at risk for qualified nonrecourse
at Risk, later). in (6) under At-Risk Activities, earlier,
financing secured by real property used and you only have amounts borrowed
in the activity of holding real property before May 4, 2004, that are described
At-Risk Activities (other than mineral property). See in (3) above.
The at-risk limitation rules apply to Qualified Nonrecourse Financing, later.
losses from the following activities Qualified Nonrecourse
carried on as a trade or business or for 2. Cash, property, or borrowed
the production of income. amounts used in the activity that are Financing
1. Holding, producing, or distributing protected against loss by a guarantee, Qualified nonrecourse financing is
motion picture films or videotapes. stop-loss agreement, or other similar financing for which no one is personally
arrangement (excluding casualty liable for repayment and is:
2. Farming, as defined in insurance and insurance against tort • Borrowed by you in connection with
section 464(e). liability). holding real property;
• Secured by real property used in the
3. Leasing any section 1245 3. Amounts borrowed for use in the activity;
property, as defined in activity from a person who has an
Instructions for Form 6198 (Rev. 12-2024) Catalog Number 50013J
Nov 22, 2024 Department of the Treasury Internal Revenue Service www.irs.gov

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• Not convertible debt; and                  Separation rules.  Your activity with          Partners and S corporation share-
• Loaned or guaranteed by any federal,       respect to each film, videotape, section       holders. If you have a loss or a 
state, or local government, or borrowed      1245 property that is leased or held for       deduction from an earlier tax year that 
by you from a qualified person (defined      lease, farm, holding of real property, oil     you could not deduct because of the 
below).                                      and gas property (as defined in section        at-risk rules, these losses and 
  See Regulations section 1.465-27 for       614), or geothermal property (as               deductions must be included in the 
details, including rules for partnership     defined in section 614) that is not            current year amounts you enter in
liabilities and disregarded entities. This   aggregated with other activities under         Part I. For example, if your prior year 
section is effective for any financing       the above rules is treated as a separate       Schedule K-1 had a $1,500 loss in 
incurred on or after August 4, 1998, but     activity.                                      box 1, but because of the at-risk rules 
taxpayers can apply the section              Each investment that is not a part of a        your loss was limited to $500, include 
retroactively.                               trade or business is treated as a              both the $1,000 loss from your prior year 
                                             separate activity.                             and the amount from your current year 
                                                                                            Schedule K-1 on line 1 of Form 6198.
  A qualified person is a person who 
actively and regularly engages in the                                                       Closely held corporations.   A closely 
                                             Specific Instructions
business of lending money (for example,                                                     held corporation must apply the 
a bank or savings and loan association).     If you are engaged in more than one            limitation on the deduction for interest 
                                             at-risk activity or in both at-risk activities expense under section 163(j) before 
  A qualified person is not:                 and not-at-risk activities, you must           applying the at-risk limitations.
• A person related to you unless the         allocate income, gains, losses, and 
person would be a qualified person but       deductions to each activity.                   Line 1
for the relationship and the nonrecourse     Partnerships and S corporations                Ordinary Income (Loss)
financing is commercially reasonable         must give their partners and                   Taxpayers other than partners or
and on the same terms as loans to            shareholders a separate statement of           S corporation shareholders.      Enter 
unrelated persons,                           income, expenses, and deductions for           your ordinary income or loss from the 
• The seller of the property (or a person    each at-risk and not-at-risk activity.         at-risk activity without regard to the 
related to the seller), or
• A person who receives a fee as a           When filling in Parts I, II, and III, enter    at-risk limitations. This is the amount 
result of your investment in the property    only amounts that relate to the activity       you get when you subtract your total 
(or a person related to that person).        included on this form. Use accepted tax        deductions (including prior year 
                                             accounting methods to figure the               deductions that were not allowed 
                                             amounts to enter.                              because of the at-risk rules) from your 
Aggregation or Separation                                                                   total income from the activity for the 
                                             If you are a partner or an S 
of Activities                                corporation shareholder, enter any items       current year.
File one form if your activities are listed  for the activity that are from your            Do not include on line 1 capital or 
under the aggregation rules. File a          investment in the activity or were             ordinary gains and losses from the sale 
separate form for each activity if your      passed through to you on Schedule K-1          or other disposition of assets used in the 
activities are listed under the separation   or a similar statement.                        activity or of an interest in the activity. 
rules.                                                                                      These amounts, casualty or theft gains 
                                             Description of activity. After the             and losses, and investment interest 
Aggregation rules.   All section 1245        description of the activity, if applicable,    expense are entered on lines 2a, 2b, 2c, 
properties that are leased or held for       enter the name and identifying number          and 4.
lease and placed in service in any tax       of the partnership or S corporation.
year of a partnership or an S corporation                                                   Partners and S corporation share-
are treated as one activity. A partner in a  Part I—Current Year Profit                     holders. Enter the amount from box 1 
partnership or an S corporation                                                             of your current year Schedule K-1 (Form 
shareholder can aggregate and treat as       (Loss) From the Activity,                      1065 or Form 1120-S) (plus any prior 
a single activity all of the properties of   Including Prior Year                           year ordinary loss that you could not 
that partnership or S corporation that       Nondeductible Amounts                          deduct because of the at-risk rules).
are included within each of categories 
(1), (2), (4), and (5) under At-Risk         Taxpayers other than partners or               Lines 2a, 2b, and 2c
Activities, earlier.                         S corporation shareholders.  If you            Gain (Loss)
                                             have losses or deductions from an 
  Activities described in (6) under          earlier tax year that you could not 
At-Risk Activities, earlier, that constitute deduct because of the at-risk rules,           Combine long- and short-term capital 
a trade or business are treated as one       include those amounts on the                   gains and losses and ordinary gains and 
activity if (a) the taxpayer actively        appropriate form or schedule of your           losses from the sale or other disposition 
participates in the management of that       current year tax return before starting        of assets used in the activity or of your 
trade or business, or (b) the business is    Part I. For example, if 2024 is the current    interest in the activity. Enter gains and 
carried on by a partnership or an S          year, and your 2023 Schedule C (Form           losses without regard to the at-risk 
corporation and 65% or more of the           1040 or 1040-SR) had a $1,500 loss on          limitations, the limitation on capital 
losses for the tax year are allocable to     line 31, but because of the at-risk rules      losses, or the passive activity loss 
persons who actively participate in the      your loss was limited to $500, include         limitations. If more than one item is 
management of the trade or business.         the $1,000 on your 2024 Schedule C             included on a line, attach a statement 
Similar rules apply to activities            (Form 1040 or 1040-SR) in Part V, Other        describing each item.
described in (1) through (5) under           Expenses, and identify it as a prior year 
At-Risk Activities, earlier.                 loss.                                          Do not include amounts on

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lines 2a and 2b that are included on included on line 8 of Form 4952, and or 1040-SR) gain of $3,100 on line 2a.
line 2c. Enter the form number or enter that amount on line 4 of Line 5 shows a current year loss of
schedule letter to the left of the entry Form 6198. You must reduce the $1,500. You report the $3,100 gain on
space for line 2c. For example, if you file allowable investment interest deduction Schedule D (Form 1040 or 1040-SR)
Form 4684, Casualties and Thefts, and on Form 4952 by the amount you carry and can deduct $3,100 of the $4,600
carry amounts from that form to Form to Form 6198. If you filed Form 6198 for loss on Schedule C (Form 1040 or
4797, Sales of Business Property, either the prior tax year, include on line 4 of 1040-SR). You complete Part II or Part III
(a) enter the amounts attributable to the your current year Form 6198 any of Form 6198 and determine that only
activity from Form 4684 on line 2c and investment interest expense from the $600 of the $1,500 excess loss on line 5
enter “Form 4684” on the dotted line prior tax year that was limited because is deductible in the current year. You
next to the entry space, or (b) enter the of the at-risk rules. replace the $4,600 loss first entered on
amount attributable to the activity Schedule C (Form 1040 or 1040-SR)
carried from Form 4684 to Form 4797 Line 5 with $3,700 ($3,100 + $600), the total
on line 2b. If you carry a loss from Form Current Year Profit (Loss) loss allowed in the current year.
4684 to Schedule A (Form 1040 or
1040-SR), enter on line 2c either the If line 5 shows a current year profit, you Part II—Simplified
loss from Schedule A (Form 1040 or may not have to complete the rest of this Computation of Amount At
1040-SR) or the loss from Form 4684. form. Report all of the income, gains,
Taxpayers other than partners or deductions, and losses shown on lines 1 Risk
S corporation shareholders. Include through 4 on the forms and schedules Part II is a simplified method of figuring
on your current year Schedule D (Form normally used, and attach them to your your amount at risk. It can be used only
1040 or 1040-SR), Form 4797, or other tax return. Also attach Form 6198 and if you know your adjusted basis in the
forms and schedules any prior year keep a copy for your records. activity or in your interest in the
partnership's or S corporation's at-risk
losses that you could not deduct activity.
because of the at-risk rules. If your current year profit is from a
passive activity and you have a loss Part III is a longer method of figuring
Partners and S corporation share- from any other passive activity, see the your amount at risk, which may allow a
holders. Include on lines 2a, 2b, and Instructions for Form 8582, Passive larger amount at risk. You do not need to
2c your current year gains and losses Activity Loss Limitations, or the complete Part II if you use Part III.
and prior year losses attributable to the Instructions for Form 8810, Corporate
activity that you could not deduct Passive Activity Loss and Credit Line 6
because of the at-risk rules. Limitations, whichever applies. Adjusted Basis on the First Day of
Line 3 Even if you have a current year Tax Year
profit on line 5, you may have
Other Income and Gains From the CAUTION! Sole proprietors. Filers of Schedules
recapture income if you
Activity received a distribution or had a C and F (Form 1040 or 1040-SR) must
transaction during the year that reduced not reduce the amount on this line by
If you were a partner or S corporation your amount at risk in the activity to less any liabilities. See Pub. 551, Basis of
shareholder, include on line 3 other than zero at the close of the tax year. Assets, for rules on adjusted basis.
income and gains from Schedule K-1 See Pub. 925 for information on the Partners. To figure the adjusted basis,
that you did not include on lines 1 recapture rules. see Pub. 541, Partnerships.
through 2c.
S corporation shareholders. To figure
Line 4 the adjusted basis, see the Instructions
If line 5 shows a current year loss,
Other Deductions and Losses your loss may be limited to the income for Form 1120-S.
From the Activity or gains, if any, included on lines 1, 2, If the partnership or S
and 3. Separate the items of income, corporation is engaged in more
If you were a partner or S corporation gains, deductions, and losses on lines 1 CAUTION! than one at-risk activity or in
shareholder, include on line 4 other through 4. The income and gains are both at-risk activities and not-at-risk
deductions and losses from fully reportable on your tax return. The activities, you must figure the part of
Schedule K-1 that you did not include deductions and losses are allowable your adjusted basis that is allocable to
on lines 1 through 2c. (subject to any other limitation such as each at-risk activity. See Aggregation or
the passive activity rules) to the extent Separation of Activities, earlier, to
of the income and gains. To determine determine each at-risk activity in which
If you have investment interest
the allowable portion of each deduction a partnership or S corporation is
expense from your at-risk activity, first
or loss, divide each deduction or loss engaged.
complete Form 4952, Investment
from the activity by the total loss from
Interest Expense Deduction, to figure
the activity on line 5. Then, multiply the
your allowable investment interest Line 7
total income and gains by this fraction.
deduction. Increases for the Tax Year
Complete the rest of the form to see
Do not include the current year income
If you have investment interest how much, if any, of the excess loss can
or gains shown on lines 1 through 3.
expense from other activities on be deducted.
Form 4952, determine the allowable
investment interest deduction Example. You have a Schedule C Include changes during the current
attributable to the at-risk activity (Form 1040 or 1040-SR) loss of $4,600 tax year in amounts that increase your
on line 1 and a Schedule D (Form 1040 amount at risk, such as the following.

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1. Net fair market value (FMV) of financing (defined earlier under Part III—Detailed
property you own (not used in the Qualified Nonrecourse Financing) used
activity) that secures nonrecourse loans to finance the activity, to acquire Computation of Amount At
used to finance the activity, to acquire property used in the activity, or to Risk
property used in the activity, or to acquire your interest in the activity. Only If you completed Part III of Form 6198
acquire your interest in the activity. amounts included on line 6 can be for this activity for the prior tax year, skip
Include the nonrecourse loans on line 9 entered on line 9. lines 11 through 14. Then, see the
(if included on line 6). Generally, the net 2. Cash, property, or borrowed instructions for lines 15 and 16, and the
FMV is determined when the property is amounts protected against loss by a instructions for line 18, later, to
pledged as security for the loan. guarantee, stop-loss agreement, or determine the amounts to enter on
Do not enter the net FMV if (a) the other similar arrangement. Enter this those lines.
nonrecourse loan was from a person amount only if it was included on line 6. If the activity began on or after one of
who has an interest in the activity other Do not include items covered by the effective dates shown below and
than as a creditor or who is related casualty insurance or insurance against you did not complete Part III of Form
under section 465(b)(3)(C) to a person tort liability. 6198 for this activity for the prior tax
(except you) having such an interest, 3. Amounts borrowed from a person year, skip lines 11 through 14. Enter -0-
and (b) the activity is described in (1) who has an interest in the activity other on line 15 and complete the rest of Part
through (5) (or (6) for amounts borrowed than as a creditor or who is related III.
after May 3, 2004) under At-Risk under section 465(b)(3)(C) to a person
Activities, earlier. However, (a) does not (except you) having such an interest. Effective Dates
apply to amounts borrowed by a This does not apply to (a) amounts Generally, the effective date is the first
corporation from a person whose only borrowed by a corporation from a day of the first tax year beginning after
interest in the activity is as a person whose only interest in the 1975 if the activity is described in (1)
shareholder of the corporation. See activity is as a shareholder of the through (4) under At-Risk Activities,
Pub. 925 for definitions. corporation, or (b) amounts borrowed earlier.
2. Cash and the adjusted basis of after May 3, 2004, and secured by real If the activity is described in (5) under
other property (determined at the time of property used in the activity of holding At-Risk Activities, earlier, the effective
the contribution) contributed to the real property (other than mineral date is usually October 1, 1978, for
activity during the tax year. However, if property) that, if nonrecourse, would be wells started after September 30, 1978.
you used your own assets to repay a qualified nonrecourse financing. Enter Generally, a well started before October
nonrecourse debt and you included an these amounts only if they were 1, 1978, is not subject to the at-risk
amount in (1) above, the amount included on line 6 and not included rules.
included as repayments cannot be more under (1) or (2) above. This applies only
than the amount by which the balance of to activities described in (1) through (5) The activity of holding real property is
the loan at the time of repayment under At-Risk Activities, earlier. See subject to the at-risk rules for property
exceeds the net FMV of property you Pub. 925 for definitions and more placed in service after 1986, and for an
own (not used in the activity) that details. interest acquired after 1986 in an S
secures the debt. 4. Withdrawals and distributions corporation, partnership, or other
3. Loans used to finance the activity, during the tax year — both cash and the pass-through entity engaged in an
to acquire property used in the activity, adjusted basis of noncash items (less activity of holding real property. An
or to acquire your interest in the activity nonrecourse liabilities to which the activity of holding real property does not
for which you are personally liable, and noncash items are subject) — including include the holding of mineral property.
qualified nonrecourse financing (defined assets used in the activity to repay Holding mineral property may be
earlier under Qualified Nonrecourse certain debts. subject to at-risk limitations other than
the special rules that apply to activities
Financing). Do not enter amounts 5. Nonrecourse liabilities included of holding real property.
included in (2) under Increases for the on line 6 of property you contributed to
Tax Year or on line 6. the activity. In most cases, the effective date for
4. Percentage depletion for this year all other at-risk activities is the first day
deducted in excess of the adjusted Line 10b of the first tax year beginning after 1978.
basis of depletable property for the Amount At Risk If you are a partner or an S
activity.
corporation shareholder, the date you
If the amount on this line is smaller than became a partner or shareholder may
Line 9 your overall loss from the activity determine whether you are subject to
Decreases for the Tax Year (line 5), you may want to complete Part the at-risk rules.
III to see if Part III gives you a larger
Do not include the current year amount at risk. Line 11
deductions or losses shown on lines 1 If the amount on line 10b is zero, Investment in the Activity at the
through 4. ! you may be subject to the Effective Date
CAUTION recapture rules. See Pub. 925.
Include changes during the current Taxpayers other than partners or
tax year in amounts that decrease your S corporation shareholders. Use the
amount at risk, such as the following. Line 11 Worksheet and its instructions
1. Nonrecourse loans (including to figure your investment in the activity
recourse loans changed to nonrecourse at the effective date. Enter all amounts
loans) other than qualified nonrecourse as of the effective date.

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Partners and S corporation share-         partnership or S corporation is engaged                                             the part that is allocable to the at-risk 
holders. Enter on line 11 the basis of    in both at-risk and not-at-risk activities,                                         activity on line 11.
your investment in the partnership or S   allocate your investment between the 
corporation at the effective date. If the at-risk and not-at-risk activities. Enter 

   Line 11 Worksheet—Figure Your Investment in the Activity at the 
                                   Effective Date                                                                               Keep for Your Records
(If the activity began on or after the effective date, do not complete this worksheet.)
1.   Cash on hand and in banks for the activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1.   
2.   Inventories for the activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.   
3a.  Cost or other basis of depreciable assets for the activity (see instructions 
     below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3a.   
b.   Accumulated depreciation for the activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                3b.   
4.   Adjusted basis of depreciable assets for the activity. Subtract line 3b from line 3a . . . . . . . . . . . . . . . . . . . . . . . . .                       4.   
5a.  Cost or other basis of depletable assets at the time contributed to the 
     activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5a.   
b.   Accumulated depletion taken on or after property was contributed to the 
     activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5b.   
6.   Adjusted basis of depletable assets for the activity. Subtract line 5b from line 5a . . . . . . . . . . . . . . . . . . . . . . . . . .                      6.   
7.   Adjusted basis of land for the activity (net of any amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                7.   
8.   Other assets for the activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    8.   
9.   Cash basis taxpayer investment in the activity at the effective date. Add lines 1, 2, 4, 6, 7, and 8. Enter here and on 
     Form 6198, line 11. (Accrual basis taxpayers also complete lines 10a through 14 below to figure the amount to enter 
     on Form 6198, line 11.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    9.   
10a. Trade notes and accounts receivable for the activity . . . . . . . . . . . . . . . . . . . . .                     10a.  
b.   Reserve for bad debts for the activity (see instructions below) . . . . . . . . . . . . . . .                      10b.  
11.  Net receivables for the activity. Subtract line 10b from line 10a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                11.  
12.  Add lines 9 and 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   12.  
13.  Accounts payable for the activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      13.  
14.  Accrual basis taxpayer investment in the activity at the effective date. Subtract line 13 from line 12. Enter here and on 
     Form 6198, line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   14.  
Worksheet Instructions
Lines 3a and 3b. See the instructions for line 16, item (2), earlier, for the rules on basis. Generally, the amounts for lines 3a and 3b can be taken directly from your 
depreciation schedule. Use the depreciation schedule you filed at the effective date, not the schedule for the current tax year.
Line 10b. If you use a reserve for bad debts, subtract from your accounts receivable the balance of the reserve on the effective date. But only subtract up to the amount you 
were allowed as a deduction under repealed section 166(c) for years before the effective date.

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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 end Total amounts from Subtract (d) from (c) Smaller of (b) or (e)
year 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. You had losses in 1970, 1971, and 1975. At the end of each of those years, you had outstanding amounts not at risk of $1,000. You had losses of $500 in 1970,
$300 in 1971, and $500 in 1975.
For 1970, you enter $500 in column (b), $1,000 in column (c), $1,000 in column (e), and $500 in column (f).
For 1971, you enter $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, you enter $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.
Your 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)).

Line 12 end. Use the Line 12 Worksheet and its at the effective date. Enter this amount
instructions to figure this amount. only if it was included on line 11. Do not
Increases at Effective Date include items covered by casualty
Make all entries on a year-by-year insurance or insurance against tort
Enter your share of amounts such as the basis. Include amounts only for years liability.
following. before the effective date. Do not 3. Amounts outstanding at the
1. Net FMV of your own property accumulate totals of earlier losses or effective date borrowed from a person
(not used in the activity) that secures nonrecourse debts. who has an interest in the activity other
nonrecourse loans used to finance the If you took a deduction for than as a creditor or who is related
under section 465(b)(3)(C) to a person
activity, to acquire property used in the ! percentage depletion for an item (except you) having such an interest.
activity, or to acquire your interest in the CAUTION of depletable property in excess
activity that will be included on line 14. of the adjusted basis of the property in a This does not apply to amounts
Generally, the net FMV is determined year for which you had a loss for the borrowed by a corporation from a
when the property is pledged as activity, subtract the amount of the person whose only interest in the
security for a loan. excess from the loss for that year. activity is as a shareholder of the
Do not enter the net FMV if (a) the corporation. Enter these amounts only if
nonrecourse loan was from a person Line 14 they were included on line 11 and not
who has an interest in the activity other included under (1) or (2) above. This
than as a creditor or who is related Decreases at Effective Date applies only to activities described in (1)
under section 465(b)(3)(C) to a person through (5) under At-Risk Activities,
(except you) having such an interest, Enter your share of amounts such as the earlier. See Pub. 925 for definitions and
and (b) the activity is described in (1) following. more details.
through (5) under At-Risk Activities, 1. Nonrecourse loans outstanding at 4. If you are not an S corporation
earlier. However, (a) does not apply to the effective date used to finance the shareholder, also include liens and
amounts borrowed by a corporation activity, to acquire property used in the encumbrances on property you
from a person whose only interest in the activity, or to acquire your interest in the contributed to the activity that are
activity is as a shareholder of the activity, including recourse loans included on line 11. If you are an S
corporation. See Pub. 925 for changed to nonrecourse loans. Enter corporation shareholder, do not include
definitions. If the activity is described in this amount only if it was included on any loans that were assumed by the
(6) under At-Risk Activities, earlier, you line 11. corporation or that were liens or
can include these amounts. encumbrances on property you
2. Cash, property, or borrowed contributed to the corporation if the
2. Total losses from years before the amounts, protected against loss by a corporation took the property subject to
effective date for which there were equal guarantee, stop-loss agreement, or the debt.
or greater amounts not at risk at year other similar arrangement outstanding

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Line 15 (except you) having such an interest, If you are not an S corporation
and (b) the activity is described in (1) shareholder, enter the total net income
Amount At Risk through (5) (or (6) for amounts borrowed from the activity since the effective date,
after May 3, 2004) under At-Risk taking into account only those years the
If you completed Part III of Form 6198 Activities, earlier. However, (a) does not activity had net income. For years since
for the prior tax year, check box b and apply to amounts borrowed by a the effective date that the activity had a
enter the amount from line 19b of the corporation from a person whose only net loss, see the instructions for line 18,
prior year form on this line. interest in the activity is as a item (5), later.
Do not enter the amount from shareholder of the corporation. See If you are an S corporation
Pub. 925 for definitions.
! line 10b of the prior year tax shareholder, enter your total net income
CAUTION form. Also, do not include on 2. Cash and the adjusted basis of from the activity for profit years since the
this line any amounts that are not at risk. other property contributed to the activity effective date. Income from the activity
since the effective date. Adjusted basis includes gain recognized under section
is the basis that would be used to figure 357(c) on contributions of property to
Line 16 the loss if the property was sold the activity. Include all distributions you
Increases immediately after you contributed it to received from the activity as well as your
the activity. See Pub. 551 for details. share of the activity's taxable income.
If you completed Part III of Form 6198 If you are an S corporation 5. Gain recognized on the transfer
for your prior tax year, check box b and shareholder and you contributed or disposition of all or part of the activity
enter on this line any increases property to the corporation subject to a or of your interest in the activity since
described in (1) through (9) below that liability, including a liability you are the effective date.
occurred since the end of your prior tax personally required to repay, then you 6. Amounts you included in income
year. must reduce the total of the adjusted since the effective date because your
basis of all the property you contributed amount at risk was less than zero.
If you completed Part III of your prior by the total of all liabilities the property
year form, “since effective date” means was subject to. This applies whether the 7. All money from outside the
since the end of your prior tax year. corporation took the property subject to, activity used since the effective date to
or assumed, the liabilities. repay loans included on lines 14 and 18.
If, however, you used your own assets to
3. Loans for which you are repay a nonrecourse debt and you
Enter your share of amounts such as personally liable that were used to included an amount in Increases,
the following. finance the activity, to acquire property earlier, the amounts included as
1. Net FMV of property you own (not used in the activity, or to acquire your repayments cannot exceed the amount
used in the activity) that secures interest in the activity and qualified by which the balance of the loan at the
nonrecourse loans that were acquired nonrecourse financing (defined under time of repayment exceeds the net FMV
since the effective date and were used Qualified Nonrecourse Financing, of property you own (not used in the
to finance the activity, to acquire earlier). Do not enter amounts included activity) that secures the debt.
property used in the activity, or to in (2) above.
8. Percentage depletion deducted in
acquire your interest in the activity. 4. Total net income from this activity excess of the adjusted basis of the
Generally, the net FMV is determined since the effective date (excess of all depletable property for the activity since
when the property is pledged as items of income received or accrued the effective date. Use the Line 16
security for the loan. over the allowable deductions). Do not Worksheet to figure this amount. Be
Do not enter the net FMV if (a) the enter any amount less than zero. Do not sure to include the amount for the
nonrecourse loan was from a person include the current year income or current year.
who has an interest in the activity other gains.
9. If you are an S corporation
than as a creditor or who is related
shareholder, enter the loans you made
under section 465(b)(3)(C) to a person

Line 16 Worksheet (Item 8)—Figure Percentage Depletion Deducted in
Excess of
the Adjusted Basis of Depletable Property Keep for Your Records
(c) (d)
(a) (b) Adjusted basis of depletable property before Excess percentage depletion
Year Percentage depletion deduction any depletion deduction for (column (b) minus column (c))
the year but not less than zero

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶

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to your S corporation since the effective If you are an S corporation For loans, enter the amount of
date. Do not include notes that you have shareholder and the property is subject TIP the loan you incurred, not the
given to the activity that are still to debt that would be included on line 14 current balance of the loan.
outstanding. (or on this line except for the fact that
there are liens or encumbrances on the Line 19b
Line 18 property in the activity), reduce the
Amount At Risk
Decreases basis of the distributed property by the
amount of the debt.
If the amount on line 19b is zero, you
If you completed Part III of Form 6198 If you are not an S corporation may be subject to the recapture rules.
for your prior tax year, check box b and shareholder, reduce the adjusted basis See Pub. 925.
enter on this line any decreases of property withdrawn by the amount, at
described in (1) through (8) below that the time of withdrawal, of any Part IV—Deductible Loss
occurred since the end of your prior tax nonrecourse liability to which the
year. property is subject. Line 21
Do not include any money from the Deductible Loss
If you completed Part III of your prior activity used to repay loans described in
year tax form, “since effective date” the instructions for line 14 on page 5. If the loss on line 5 is equal to or less
means since the end of your prior tax Include amounts that were withdrawn than the amount on line 20, report the
year. and recontributed. Recontributed items in Part I in full on your return,
amounts must also be included on subject to any other limitations such as
Enter your share of amounts such as line 16. the passive activity and capital loss
the following. Partners and S corporation limitations. Follow the instructions for
1. Cash, property, or borrowed shareholders who recognize gain on your tax return.
amounts protected against loss by a distributions from the partnership or S
guarantee, stop-loss agreement, or corporation must include the If the loss on line 5 is more than the
other similar arrangement entered into distributions on line 18. They must also amount on line 20, you must limit your
since the effective date. Do not include take them into account as income from deductible loss to the amount on
items covered by casualty insurance or the activity on line 16 unless the gain is line 20, subject to any other limitations.
insurance against tort liability. Enter this recognized in the current year. Examples. (a) If line 5 is a loss of
amount only if it was included on line 16. 4. Recourse loans (and qualified $400 and line 20 is $1,000, enter ($400)
See the instructions at the beginning of nonrecourse financing) changed to on line 21. (b) If line 5 is a loss of $1,600
Part III, earlier, for information on nonrecourse loans since the effective and line 20 is $1,200, enter ($1,200) on
effective dates. date. line 21. (c) If line 5 is a loss of $800 and
2. Amounts borrowed since the 5. Total losses from this activity line 20 is zero, enter -0- on line 21.
effective date from a person who has an deducted since the effective date. Take When comparing lines 5 and 20,
interest in the activity other than as a into account only those years in which TIP treat the loss on line 5 as a
creditor or who is related under section you had a net loss. Do not include positive number only for
465(b)(3)(C) to a person (except you) current year losses or deductions. Also, purposes of determining the amount to
having such an interest. However, this do not include losses or deductions you enter on line 21.
does not apply to (a) amounts borrowed could not deduct because of the at-risk
by a corporation from a person whose rules.
If the amount on line 21 is made up of
only interest in the activity is as a Your prior tax year line 21 only one deduction or loss item, report
shareholder of the corporation, or (b) ! deductible loss reduces your on your return the amount shown on
amounts borrowed after May 3, 2004, CAUTION at-risk investment as of the line 21, subject to any other limitations.
and secured by real property used in the beginning of your current tax year. Follow the instructions for your tax return
activity of holding real property (other to determine where to report the amount
than mineral property) that, if 6. Nonrecourse liabilities of property on your return.
nonrecourse, would be qualified you contributed to the activity since the
nonrecourse financing. Enter these effective date. If the amount on line 21 is made up of
amounts only if they were included on 7. Any other at-risk amounts more than one deduction or loss item in
line 16 and not included under (1) included on line 15 that changed to Part I (such as a Schedule C loss and a
above. This applies to activities amounts that are not at risk since the Schedule D loss), a portion of each
described in (1) through (5) (or (6) for effective date. such deduction or loss item is allowed
amounts borrowed after May 3, 2004) (subject to other limitations) for the year.
under At-Risk Activities, earlier. See the 8. If you are an S corporation
instructions at the beginning of Part III, shareholder, do not include any loans Determine this portion by multiplying the
earlier, for information on effective that were assumed by the corporation or loss on line 21 by a fraction. Figure the
dates. that were liens or encumbrances on fraction by dividing each item of
property you contributed to the deduction or loss from the activity by the
3. Cash and the adjusted basis of corporation since the effective date if the total loss from the activity on line 5. The
other property withdrawn or distributed corporation took the property subject to remaining portion of each deduction or
since the effective date. Adjusted basis the debt. loss item from the activity is disallowed
is the basis that would be used to figure and must be carried over to next year.
the loss if the property was sold by the
activity at the time you withdrew it or it Paperwork Reduction Act Notice.
was distributed to you. We ask for the information on this form

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to carry out the Internal Revenue laws of information are confidential, as required If you have comments concerning the
the United States. You are required to by section 6103. accuracy of these time estimates or
give us the information. We need it to The time needed to complete and file suggestions for making this form
ensure that you are complying with this form will vary depending on simpler, we would be happy to hear from
these laws and to allow us to figure and individual circumstances. The estimated you. See the instructions for the tax
collect the right amount of tax. burden for individual taxpayers filing this return with which this form is filed.
You are not required to provide the form is approved under OMB control
information requested on a form that is number 1545-0074 and is included in
subject to the Paperwork Reduction Act the estimates shown in the instructions
unless the form displays a valid OMB for their individual income tax return.
control number. Books or records The estimated burden for all other
relating to a form or its instructions must taxpayers who file this form is shown
be retained as long as their contents below.
may become material in the
administration of any Internal Revenue Recordkeeping. . . . . . . 1 hr., 12 min.
law. Generally, tax returns and return Learning about the law
or the form. . . . . . . . . . 1 hr.
Preparing the form. . . . 1 hr., 25 min.
Copying, assembling,
and sending the form
to the IRS. . . . . . . . . . . 20 min.

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