The at-risk rules place a limit on the amount a taxpayer can deduct as losses from activities. Generally, any loss from an activity that is subject to the at-risk rules is allowed only to the extent of the total amount the taxpayer has at risk in the activity at the end of the tax year. A taxpayer is considered at-risk in an activity to the extent of cash and the adjusted basis of other property the taxpayer contributed to the activity and certain amounts borrowed for use in the activity.
Form 6198 is used to figure the profit (loss) from an at-risk activity for the current year. Form 6198 should be filed if a taxpayer had any amounts that were not at risk invested in an at-risk activity. There are several ways to generate this form in the software depending on where it is reported on the tax return.