Discussion:At Risk Limitation and Form 6198

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Discussion Forum Index --> Basic Tax Questions --> At Risk Limitation and Form 6198
Discussion Forum Index --> Tax Questions --> At Risk Limitation and Form 6198

Skq9545 (talk|edits) said:

October 18, 2007

I have researched for previous discussions under "At Risk Limitations" and Form 6198. I picked up a new client and was looking through last years tax return and find that a 6198 was filed. The client owns a rental home which did generate a loss for past 2 years as well as the current year. I read the instructions for Schedule E along with the Publication 925. It seems to me that if she has a mortgage on the property, it is all at risk. Am I interpreting something incorrectly? Lacerte generated the Schedule and Form 8582 for me based on my input. The other accountant picked up the loss carryforward on Form 6198 under "Other".

Thanks for your input. Skq9545 09:53, 18 October 2007 (CDT)

Kevinh5 (talk\|edits) said:	18 October 2007
Is the loss unallowed for PAL reasons?

Skq9545 (talk\|edits) said:	October 18, 2007
Her rental would be a passive activity. It is not a trade or business activity. I will look at the rules under Form 8582 to see what is going on there.

JR1 (talk\|edits) said:	October 18, 2007
I can't imagine using a 6198 in that situation. Is she 100% owner?

TonyM (talk\|edits) said:	18 October 2007
8582 is for PAL limitations. 6198 is for at risk limitations. At risk limitations are considered first then PAL limitations. Is the mortgage seller financed? That can make a difference in the "at risk limitations". If it is an ordinary bank loan it should be "at risk". Take a look at the "Qualified nonrecourse financing" definition.