At-Risk Income Recapture

[Unregistered]

Last year the taxpayer had losses in an activity that were limited due to the amount at risk. This year they have income in the activity, but their at-risk amount has decreased below zero. We have losses that were taken in prior years, but other years where income was claimed. Are they subject to at-risk income recapture? If so, to what extent?

[Bees Knees]

It depends. You left out some important details. Like why at-risk basis went down in a year where there is income.

[Unregistered]

The at-risk basis went down because the shareholder loan liability account was reduced.

[Bees Knees]

Then that would result in recapture. TTB, page 7-12 under "Recapture rule - at-risk basis less than zero" describes how to calculate the recapture amount.