At-Risk Rules

[Lance Emerson]

Is it any wonder why our heads spin and our eyes glaze over and other accountants get a sympathetic look on their faces and say "Oh, I'm so sorry," when you tell them you do tax work?

Instructions for Form 6198 (keep in mind that I was just trying to find out if a particular activity was subject to at-risk rules).

Ahem...

"The at-risk limitation rules apply to losses from the following activities carried on as a trade or business or for the production of income.

1. Holding, producing, or distributing motion picture films or video tapes.

2. Farming as described in section 464(e)(1).

3. Leasing any section 1245 property as defined in section 1245(a)(3).

4. Exploring for or exploiting oil and gas resources.

5. Exploring for or exploiting geothermal deposits as defined in section 613(e)(2)..."

---------------Are you ready for number 6?---------------------

"6. ANY OTHER ACTIVITY THAT IS NOT INCLUDED IN (1) THROUGH (5) ABOVE!!!!"

Is it any wonder that tax accountants are angry, bitter, cynical people?

Could they just say "any trade or business or income producing activity?" Nooooo-o-o-o. They have to play games. They have to make it even more complicated than it already is.

I don't think form instructions are an appropriate place for IRS writers to play jokes on tax professionals. But you can bet the writers were rolling on the floor laughing after launching that section of the instructions.

Thank you. I feel better now. I just wasted a bunch of time trying to figure out (1) through (5), but I do feel better.

[Snaggletooth]

Booger-Picking

Sorry Lance. I guess your money spent on that little limited partnership for Booger Pickers can't be deducted. Falls under category 6.

Speaking of limited partnerships, how does a client bail out of one of these? They generally have to sign an agreement which allows the partnership to keep the money until the project endows. That could be as long as 15 years. They can't cash in their investment from the entity, so the only thing they can do is find a buyer to whom they may transfer their shares.

Easier said than done, and even if a buyer is found, it is at a heavy discount. The buyer doesn't want to be confronted with the at-risk rules either, so he is going to lower his price accordingly.

Any ideas? Please don't tell me the client was stupid to ever get in one of these from the outset - we already know that -- it's "what do we do NOW???"

Sometimes tax people get drug into investment counseling whether we want to or not. As usual, the mentality is "what have you done for me LATELY?"

Regards, Ron J.

[apricot320]

Cut your losses

Just sell the darn thing to anyone who will give you a buck and take the loss on your tax return. At least that way you might recoup as much as 35% of your investment. . .eventually. . .all things being equal, like your tax bracket and capital gains to offset the loss so it doesn't drag on for years.

[Snaggletooth]

Dates

Check out the dates on this thread. It has obviously been resurrected.

However, just as relevant now as ever. A very good point...

[S T]

Good catch on dates of post

Snags,

Is someone trying to remind us of something. It has been "ages" since we have heard from Lance Emerson, oh how I miss him!

Sandy

[Snaggletooth]

Lance Emerson

Yes indeed S. T. When I saw his name I thought I had seen a ghost. A very durable and accurate source of information and a gentleman as well. He would never lower himself to some of the shouting matches me and Bart get into.

Wonder where he went? One of the TTB guys might know....

[Gretel]

Yes, I was delighted too to see Lance has come back. But thanks to you, Snag, this dream was destroyed. I didn't watch the dates.