At-Risk Rules

Definition: Losses from a business operation are limited to the amount of money you can actually lose in the business. You are subject to at-risk rules if you are filing Schedules C, E, or F. For example, if you are a member of a partnership and are reporting a loss from the Partnership K-1 on your Schedule E, your loss is limited to the amount of money you can actually lose in the partnership. If you invested $100,000 in the partnership, then you can actually lose only up to $100,000. If any part of your investment in the business is not at-risk, you must complete Form 6198 (PDF) to calculate your allowable loss.