1040-US: Form 6198, line 5 loss calculation

Alerts and notices


What happens if Form 6198, line 5, shows a current-year loss?


Per Form 6198 instructions, if line 5 shows a current-year loss, the loss may be limited to the income or gains, if any, included on lines 1, 2, and 3. If lines 1, 2, and 3 include income, gains, and losses, separate the items. The income and gains are fully reportable on the tax return. The losses and deductions are allowable (subject to any other limitation such as the passive activity rules) to the extent of the income and gains. To determine the allowable portion of each loss or deduction, the tax application divides each loss or deduction from the activity by the total losses and deductions from the activity on line 5. Then, the tax application multiplies the total income and gains by this fraction. The At-Risk Allocation Worksheet details the allowable amounts, if any, for regular and AMT calculations.

Related topic: Form 6198 - At-risk calculations FAQs (1040)