Form 6198 At-Risk Limitations: IRC 465 Calculations, Grouping, Elections and Schedules

Description

The at-risk loss limitation rules of IRC 465 have long challenged taxpayers and tax advisers alike. Section 465 serves as a barrier to prevent taxpayers holding partnership or S corporation shares from deducting current tax losses for activities in which they do not have an economic loss. For advisers and compliance professionals, determining which losses can be currently deducted and which must be deferred is complex.

Section 465(a) limits the current tax losses an individual may deduct from certain activities to the amount at which the taxpayer is “at risk” for that activity. The Section further defines amounts at risk as the amount the taxpayer contributed to the activity in cash and the adjusted basis of any other property, along with any recourse debt incurred directly for use in the activity. At-risk limitation calculations are reported on Form 6198.

Section 465 is one of three provisions taxpayers must contend with to claim losses from partnership or S corp ownership. Tax professionals must have a thorough and practical grounding of the at-risk rules, including activity grouping rules and how Section 465 works with basis limitations and Section 469 passive activity loss rules to avoid costly tax mistakes.

Listen as our experienced panel of practitioners offers a thorough and practical guide to the planning, calculation and reporting requirements of the Section 465 at-risk limitation rules.

Outline

1. Taxpayers and activities subject to Section 465 at-risk limitations
2. Activities that must be reported separately
3. Aggregation rules
4. Determination of amounts at risk
5. Nonrecourse debt and amounts deemed not at risk
6. Recapture rules
7. Form 6198

Benefits

The panel will discuss these and other important topics:

• What does—and does not—qualify as “at risk” for purposes of calculating loss limitation on pass-through activities?
• What elections and grouping approaches are available to minimize the impact of loss deferral due to at-risk limitations?
• Reporting carry-forwards and recapture of prior loss deductions on Form 6198
• Maintaining schedules and substantiation of carry-forward disallowed losses

Learning Objectives

After completing this course, you will be able to:

• Establish what constitutes at-risk amounts for purposes of loss limitation calculations
• Discern activities that may or must be grouped, and which activities must be separated, for amount at risk limitation purposes
• Determine available elections to minimize loss limitations
• Recognize scenarios where deferral, or recapture, of deductions based on at-risk loss limitations occur
• Identify calculations and required schedules to complete Form 6198

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).

CPE Credit

Strafford is a NASBA CPE sponsor and our live webinars qualify for CPE credits. They offer you a high quality, cost effective, and convenient CPE option, with no lost travel time or expenses.

EA Credit

Strafford is an IRS approved continuing education provider and this course is approved for 2 enrolled agent (EA) credit hours.

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