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Department of the Treasury
Internal Revenue Service
Instructions for Form 6198

(Rev. January 2020)
At-Risk Limitations
For use with Form 6198 (Rev. November 2009) or later revision

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

Dec 10, 2019 Cat. No. 50013J

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• Secured by real property used in the        described in (1) through (5) under             Schedule C (Form 1040 or 1040-SR) in 
activity;                                     At-Risk Activities, earlier.                   Part V, Other Expenses, and identify it 
• Not convertible debt; and                                                                  as a prior year loss.
• Loaned or guaranteed by any federal,        Separation rules.  Your activity with 
state, or local government, or borrowed       respect to each film, videotape, section       Partners and S corporation share-
by you from a qualified person (defined       1245 property that is leased or held for       holders. If you have a loss or a 
below).                                       lease, farm, holding of real property, oil     deduction from an earlier tax year that 
                                              and gas property (as defined in section        you could not deduct because of the 
  See Regulations section 1.465-27 for        614), or geothermal property (as               at-risk rules, these losses and 
details, including rules for partnership      defined in section 614) that is not            deductions must be included in the 
liabilities and disregarded entities. This    aggregated with other activities under         current year amounts you enter in
section is effective for any financing        the above rules is treated as a separate       Part I. For example, if your prior year 
incurred on or after August 4, 1998, but      activity.                                      Schedule K-1 had a $1,500 loss in 
taxpayers can apply the section                                                              box 1, but because of the at-risk rules 
retroactively.                                Each investment that is not a part of          your loss was limited to $500, include 
                                              a trade or business is treated as a            both the $1,000 loss from your prior 
  A qualified person is a person who          separate activity.                             year and the amount from your current 
actively and regularly engages in the                                                        year Schedule K-1 on line 1 of Form 
business of lending money (for                                                               6198.
                                              Specific Instructions
example, a bank or savings and loan                                                          Closely held corporations.  A closely 
association).                                 If you are engaged in more than one 
                                              at-risk activity or in both at-risk activities held corporation must apply the 
  A qualified person is not:                  and not-at-risk activities, you must           limitation on the deduction for interest 
• A person related to you unless the          allocate income, gains, losses, and            expense under section 163(j) before 
person would be a qualified person but        deductions to each activity.                   applying the at-risk limitations.
for the relationship and the nonrecourse 
financing is commercially reasonable          Partnerships and S corporations must           Line 1
and on the same terms as loans to             give their partners and shareholders a         Ordinary Income (Loss)
unrelated persons,                            separate statement of income, 
• The seller of the property (or a person     expenses, and deductions for each              Taxpayers other than partners or
related to the seller), or                    at-risk and not-at-risk activity.              S corporation shareholders.      Enter 
                                                                                             your ordinary income or loss from the 
• A person who receives a fee as a            When filling in Parts I, II, and III, enter    at-risk activity without regard to the 
result of your investment in the property     only amounts that relate to the activity       at-risk limitations. This is the amount 
(or a person related to that person).         included on this form. Use accepted tax        you get when you subtract your total 
                                              accounting methods to figure the               deductions (including prior year 
Aggregation or Separation                     amounts to enter.                              deductions that were not allowed 
of Activities                                 If you are a partner or an S corporation       because of the at-risk rules) from your 
File one form if your activities are listed   shareholder, enter any items for the           total income from the activity for the 
under the aggregation rules. File a           activity that are from your investment in      current year.
separate form for each activity if your       the activity or were passed through to         Do not include on line 1 capital or 
activities are listed under the separation    you on Schedule K-1 or a similar               ordinary gains and losses from the sale 
rules.                                        statement.                                     or other disposition of assets used in the 
Aggregation rules.   All section 1245         Description of activity.     After the         activity or of an interest in the activity. 
properties that are leased or held for        description of the activity, if applicable,    These amounts, casualty or theft gains 
lease and placed in service in any tax        enter the name and identifying number          and losses, and investment interest 
year of a partnership or an S corporation     of the partnership or S corporation.           expense are entered on lines 2a, 2b, 2c, 
are treated as one activity. A partner in a                                                  and 4.
partnership or an S corporation               Part I—Current Year Profit                     Partners and S corporation share-
shareholder can aggregate and treat as                                                       holders. Enter the amount from box 1 
                                              (Loss) From the Activity, 
a single activity all of the properties of                                                   of your current year Schedule K-1 (Form 
that partnership or S corporation that        Including Prior Year                           1065 or Form 1120-S) (plus any prior 
are included within each of categories        Nondeductible Amounts                          year ordinary loss that you could not 
(1), (2), (4), and (5) under At-Risk                                                         deduct because of the at-risk rules).
Activities, earlier.                          Taxpayers other than partners or
                                              S corporation shareholders.       If you       Lines 2a, 2b, and 2c
  Activities described in (6) under           have losses or deductions from an 
At-Risk Activities , earlier, that constitute earlier tax year that you could not            Gain (Loss)
a trade or business are treated as one        deduct because of the at-risk rules,           Combine long- and short-term capital 
activity if (a) the taxpayer actively         include those amounts on the                   gains and losses and ordinary gains and 
participates in the management of that        appropriate form or schedule of your           losses from the sale or other disposition 
trade or business, or (b) the business is     current year tax return before starting        of assets used in the activity or of your 
carried on by a partnership or an S           Part I. For example, if 2020 is the            interest in the activity. Enter gains and 
corporation and 65% or more of the            current year, and your 2019 Schedule C         losses without regard to the at-risk 
losses for the tax year are allocable to      (Form 1040 or 1040-SR) had a $1,500            limitations, the limitation on capital 
persons who actively participate in the       loss on line 31, but because of the            losses, or the passive activity loss 
management of the trade or business.          at-risk rules your loss was limited to         limitations. If more than one item is 
Similar rules apply to activities             $500, include the $1,000 on your 2020 

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included on a line, attach a statement included on line 8 of Form 4952, and or 1040-SR) gain of $3,100 on line 2a.
describing each item enter that amount on line 4 of Line 5 shows a current year loss of
Form 6198. You must reduce the $1,500. Jill reports the $3,100 gain on
Do not include amounts on allowable investment interest deduction Schedule D (Form 1040 or 1040-SR)
lines 2a and 2b that are included on on Form 4952 by the amount you carry and can deduct $3,100 of the $4,600
line 2c. Enter the form number or to Form 6198. If you filed Form 6198 for loss on Schedule C (Form 1040 or
schedule letter to the left of the entry the prior tax year, include on line 4 of 1040-SR). Jill completes Part II or Part
space for line 2c. For example, if you file your current year Form 6198 any III of Form 6198 and determines that
Form 4684, Casualties and Thefts, and investment interest expense from the only $600 of the $1,500 excess loss on
carry amounts from that form to Form prior tax year that was limited because line 5 is deductible in the current year.
4797, Sales of Business Property, either of the at-risk rules. She replaces the $4,600 loss first
(a) enter the amounts attributable to the entered on Schedule C (Form 1040 or
Line 5
activity from Form 4684 on line 2c and 1040-SR) with $3,700 ($3,100 + $600),
enter “Form 4684” on the dotted line Current Year Profit (Loss) the total loss allowed in the current year.
next to the entry space, or (b) enter the If line 5 shows a current year profit, you
amount attributable to the activity may not have to complete the rest of Part II—Simplified
carried from Form 4684 to Form 4797 this form. Report all of the income, Computation of Amount At
on line 2b. If you carry a loss from Form gains, deductions, and losses shown on Risk
4684 to Schedule A (Form 1040 or lines 1 through 4 on the forms and Part II is a simplified method of figuring
1040-SR), enter on line 2c either the schedules normally used, and attach your amount at risk. It can be used only
loss from Schedule A (Form 1040 or them to your tax return. Also attach if you know your adjusted basis in the
1040-SR) or the loss from Form 4684. Form 6198 and keep a copy for your activity or in your interest in the
Taxpayers other than partners or records. partnership's or S corporation's at-risk
S corporation shareholders. Include activity.
on your current year Schedule D (Form If your current year profit is from a
1040 or 1040-SR), Form 4797, or other passive activity and you have a loss Part III is a longer method of figuring
forms and schedules any prior year from any other passive activity, see the your amount at risk, which may allow a
losses that you could not deduct Instructions for Form 8582, Passive larger amount at risk. You do not need
because of the at-risk rules. Activity Loss Limitations, or the to complete Part II if you use Part III.
Instructions for Form 8810, Corporate
Partners and S corporation share- Passive Activity Loss and Credit Line 6
holders. Include on lines 2a, 2b, and Limitations, whichever applies. Adjusted Basis on the First Day of
2c your current year gains and losses
and prior year losses attributable to the Even if you have a current year Tax Year
because of the at-risk rules. CAUTION recapture income if you
activity that you could not deduct ! profit on line 5, you may have Sole proprietors. Filers of Schedules
received a distribution or had a C and F (Form 1040 or 1040-SR) must
Line 3 transaction during the year that reduced not reduce the amount on this line by
Other Income and Gains From the your amount at risk in the activity to less any liabilities. See Pub. 551, Basis of
than zero at the close of the tax year. Assets, for rules on adjusted basis.
Activity See Pub. 925 for information on the Partners. To figure the adjusted basis,
If you were a partner or S corporation recapture rules. see Pub. 541, Partnerships.
shareholder, include on line 3 other
income and gains from Schedule K-1 S corporation shareholders. To
that you did not include on lines 1 If line 5 shows a current year loss, figure the adjusted basis, see the
through 2c. your loss may be limited to the income Instructions for Form 1120-S.
or gains, if any, included on lines 1, 2, If the partnership or S
Line 4 and 3. Separate the items of income, ! corporation is engaged in more
Other Deductions and Losses gains, deductions, and losses on lines 1 CAUTION than one at-risk activity or in
From the Activity through 4. The income and gains are both at-risk activities and not-at-risk
fully reportable on your tax return. The activities, you must figure the part of
If you were a partner or S corporation deductions and losses are allowable your adjusted basis that is allocable to
shareholder, include on line 4 other (subject to any other limitation such as each at-risk activity. See Aggregation or
deductions and losses from the passive activity rules) to the extent Separation of Activities, earlier, to
Schedule K-1 that you did not include of the income and gains. To determine determine each at-risk activity in which
on lines 1 through 2c. the allowable portion of each deduction a partnership or S corporation is
If you have investment interest expense or loss, divide each deduction or loss engaged.
from your at-risk activity, first complete from the activity by the total loss from
Form 4952, Investment Interest the activity on line 5. Then, multiply the Line 7
Expense Deduction, to figure your total income and gains by this fraction.
allowable investment interest 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 Example. Jill has a Schedule C Include changes during the current
investment interest deduction (Form 1040 or 1040-SR) loss of $4,600 tax year in amounts that increase your
attributable to the at-risk activity 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 Qualified Nonrecourse Financing) used lines 11 through 14. Then, see the
property you own (not used in the to finance the activity, to acquire instructions for lines 15 and 16, and the
activity) that secures nonrecourse loans property used in the activity, or to instructions for line 18, later, to
used to finance the activity, to acquire acquire your interest in the activity. Only determine the amounts to enter on
property used in the activity, or to amounts included on line 6 can be those lines.
acquire your interest in the activity. entered on line 9.
If the activity began on or after one of
Include the nonrecourse loans on line 9 2. Cash, property, or borrowed the effective dates shown below and
(if included on line 6). Generally, the net amounts protected against loss by a you did not complete Part III of Form
FMV is determined when the property is guarantee, stop-loss agreement, or 6198 for this activity for the prior tax
pledged as security for the loan. other similar arrangement. Enter this year, skip lines 11 through 14. Enter -0-
Do not enter the net FMV if (a) the amount only if it was included on line 6. on line 15 and complete the rest of Part
nonrecourse loan was from a person Do not include items covered by III.
who has an interest in the activity other casualty insurance or insurance against
than as a creditor or who is related tort liability. Effective Dates
under section 465(b)(3)(C) to a person 3. Amounts borrowed from a person Generally, the effective date is the first
(except you) having such an interest, who has an interest in the activity other day of the first tax year beginning after
and (b) the activity is described in (1) than as a creditor or who is related 1975 if the activity is described in (1)
through (5) (or (6) for amounts borrowed under section 465(b)(3)(C) to a person through (4) under At-Risk Activities,
after May 3, 2004) under At-Risk (except you) having such an interest. earlier.
Activities, earlier. However, (a) does not This does not apply to (a) amounts If the activity is described in (5) under
apply to amounts borrowed by a borrowed by a corporation from a At-Risk Activities, earlier, the effective
corporation from a person whose only person whose only interest in the date is usually October 1, 1978, for
interest in the activity is as a activity is as a shareholder of the wells started after September 30, 1978.
shareholder of the corporation. See corporation, or (b) amounts borrowed Generally, a well started before October
Pub. 925 for definitions. after May 3, 2004, and secured by real 1, 1978, is not subject to the at-risk
2. Cash and the adjusted basis of property used in the activity of holding rules.
other property (determined at the time of real property (other than mineral
the contribution) contributed to the property) that, if nonrecourse, would be The activity of holding real property is
activity during the tax year. However, if qualified nonrecourse financing. Enter subject to the at-risk rules for property
you used your own assets to repay a these amounts only if they were placed in service after 1986, and for an
nonrecourse debt and you included an included on line 6 and not included interest acquired after 1986 in an S
amount in (1) above, the amount under (1) or (2) above. This applies only corporation, partnership, or other
included as repayments cannot be more to activities described in (1) through (5) pass-through entity engaged in an
than the amount by which the balance of under At-Risk Activities, earlier. See activity of holding real property. An
the loan at the time of repayment Pub. 925 for definitions and more activity of holding real property does not
exceeds the net FMV of property you details. include the holding of mineral property.
own (not used in the activity) that 4. Withdrawals and distributions Holding mineral property may be
secures the debt. during the tax year — both cash and the subject to at-risk limitations other than
3. Loans used to finance the adjusted basis of noncash items (less the special rules that apply to activities
activity, to acquire property used in the nonrecourse liabilities to which the of holding real property.
activity, or to acquire your interest in the noncash items are subject) — including In most cases, the effective date for
activity for which you are personally assets used in the activity to repay all other at-risk activities is the first day
liable, and qualified nonrecourse certain debts. of the first tax year beginning after 1978.
financing (defined earlier under 5. Nonrecourse liabilities included
Qualified Nonrecourse Financing). Do on line 6 of property you contributed to If you are a partner or an S
not enter amounts included in (2) under the activity. corporation shareholder, the date you
Increases for the Tax Year or on line 6. became a partner or shareholder may
4. Percentage depletion for this year Line 10b determine whether you are subject to
the at-risk rules.
deducted in excess of the adjusted Amount At Risk
basis of depletable property for the Line 11
activity. If the amount on this line is smaller than
your overall loss from the activity Investment in the Activity at the
Line 9 (line 5), you may want to complete Part Effective Date
III to see if Part III gives you a larger
Decreases for the Tax Year amount at risk. Taxpayers other than partners or
Do not include the current year S corporation shareholders. Use the
If the amount on line 10b is
deductions or losses shown on lines 1 Line 11 Worksheet and its instructions
zero, you may be subject to the
through 4. CAUTION! to figure your investment in the activity
recapture rules. See Pub. 925. at the effective date. Enter all amounts
Include changes during the current as of the effective date.
tax year in amounts that decrease your Part III—Detailed Partners and S corporation share-
amount at risk, such as the following. holders. Enter on line 11 the basis of
Computation of Amount At
1. Nonrecourse loans (including your investment in the partnership or S
recourse loans changed to nonrecourse Risk corporation at the effective date. If the
loans) other than qualified nonrecourse If you completed Part III of Form 6198 partnership or S corporation is engaged
financing (defined earlier under for this activity for the prior tax year, skip in both at-risk and not-at-risk activities,

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allocate your investment between the the part that is allocable to the at-risk
at-risk and not-at-risk activities. Enter activity on line 11.

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. John had losses in 1970, 1971, and 1975. At the end of each of those years, John had outstanding amounts not at risk of $1,000. John had losses of $500 in 1970,
$300 in 1971, and $500 in 1975.
For 1970, John enters $500 in column (b), $1,000 in column (c), $1,000 in column (e), and $500 in column (f).
For 1971, John enters $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, John enters $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.
John's 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 year end. Use the Line 12 Worksheet at the effective date. Enter this amount
and its instructions to figure this amount. only if it was included on line 11. Do not
Increases at Effective Date include items covered by casualty
Enter your share of amounts such as the Make all entries on a year-by-year insurance or insurance against tort
following. basis. Include amounts only for years liability.
1. Net FMV of your own property before the effective date. Do not 3. Amounts outstanding at the
(not used in the activity) that secures accumulate totals of earlier losses or effective date borrowed from a person
nonrecourse loans used to finance the nonrecourse debts. who has an interest in the activity other
activity, to acquire property used in 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 that will be included on line 14. CAUTION item of depletable property in
activity, or to acquire your interest in the ! percentage depletion for an (except you) having such an interest.
Generally, the net FMV is determined excess of the adjusted basis of the This does not apply to amounts
when the property is pledged as property in a year for which you had a borrowed by a corporation from a
security for a loan. loss for the activity, subtract the amount person whose only interest in the
Do not enter the net FMV if (a) the of the excess from the loss for that year. activity is as a shareholder of the
nonrecourse loan was from a person corporation. Enter these amounts only if
who has an interest in the activity other Line 14 they were included on line 11 and not
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
(except you) having such an interest, Enter your share of amounts such as the through (5) under At-Risk Activities,
and (b) the activity is described in (1) following. earlier. See Pub. 925 for definitions and
through (5) under At-Risk Activities, 1. Nonrecourse loans outstanding at more details.
earlier. However, (a) does not apply to the effective date used to finance the 4. If you are not an S corporation
amounts borrowed by a corporation activity, to acquire property used in the shareholder, also include liens and
from a person whose only interest in the activity, or to acquire your interest in the encumbrances on property you
activity is as a shareholder of the activity, including recourse loans contributed to the activity that are
corporation. See Pub. 925 for changed to nonrecourse loans. Enter included on line 11. If you are an S
definitions. If the activity is described in this amount only if it was included on corporation shareholder, do not include
(6) under At-Risk Activities, earlier, you line 11. any loans that were assumed by the
can include these amounts. corporation or that were liens or
2. Cash, property, or borrowed encumbrances on property you
2. Total losses from years before amounts, protected against loss by a contributed to the corporation if the
the effective date for which there were guarantee, stop-loss agreement, or
equal or greater amounts not at risk at other similar arrangement outstanding

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

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

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

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