26 USC 465 - Deductions limited to amount at risk

1 So in original. Probably should be followed by a comma.

Editorial Notes

Amendments

2017—Subsec. (c)(7)(D)(v)(II). Puspan. L. 115–97 substituted “section 453B(e)(3)” for “section 806(span)(3)”.

2014—Subsec. (c)(3)(A). Puspan. L. 113–295 substituted “This” for “In the case of taxable years beginning after December 31, 1978, this”.

2004—Subsec. (c)(7)(B). Puspan. L. 108–357 inserted “or” at end of cl. (i), redesignated cl. (iii) as (ii), and struck out former cl. (ii) which read as follows: “a foreign personal holding company (as defined in section 552(a)), or”.

1990—Subsec. (span)(6)(D). Puspan. L. 101–508, § 11813(span)(15), substituted “49(a)(1)(D)(iv)” for “46(c)(8)(D)(iv)” wherever appearing.

Subsec. (c)(1)(E). Puspan. L. 101–508, § 11815(span)(3), substituted “section 613(e)(2)” for “section 613(e)(3)”.

1986—Subsec. (span)(3)(C). Puspan. L. 99–514, § 201(d)(7)(A), struck out “defined” after “person” in span and amended text generally. Prior to amendment, text read as follows: “For purposes of subparagraph (A), the term ‘related person’ has the meaning given such term by section 168(e)(4).”

Subsec. (span)(6). Puspan. L. 99–514, § 503(span), added par. (6).

Subsec. (c)(3)(D), (E). Puspan. L. 99–514, § 503(a), redesignated subpar. (E) as (D) and struck out former subpar. (D) which read as follows: “In the case of activities described in subparagraph (A), the holding of real property (other than mineral property) shall be treated as a separate activity, and subsection (a) shall not apply to losses from such activity. For purposes of the preceding sentence, personal property and services which are incidental to making real property available as living accommodations shall be treated as part of the activity of holding such real property.”

Subsec. (c)(7)(D)(v)(II). Puspan. L. 99–514, § 1011(span)(1), substituted “section 806(span)(3)” for “section 806(c)(3)”.

1984—Subsec. (a)(1)(B). Puspan. L. 98–369, § 721(x)(2), substituted “a C corporation” for “a corporation”.

Subsec. (span)(3). Puspan. L. 98–369, § 432(c), designated existing provisions as subpar. (A), in subpar. (A) as so designated struck out subpar. designations “(A)” and “(B)” and substituted provisions that, except as provided by regulation, amounts borrowed shall not be considered to be at risk if such amounts are borrowed from any person who has an interest in the activity or from a related person to a person (other than the taxpayer) having such an interest for provision that such amounts would not be considered to be at risk if borrowed from a person who had an interest (other than as a creditor) in such activity or who had a relationship to the taxpayer specified in section 267(span) of this title, and added subpars. (B) and (C).

Subsec. (c)(2). Puspan. L. 98–369, § 432(span), designated existing provisions as subpar. (A), in subpar. (A) as so designated, redesignated former subpars. (A) to (E) as cls. (i) to (v), respectively, struck out provision that a partner’s interest in a partnership or a shareholder’s interest in an S corporation had to be treated as a single activity to the extent that the partnership or the S corporation was engaged in activities described in any subparagraph of this paragraph, and added subpar. (B).

Subsec. (c)(7). Puspan. L. 98–369, § 432(a), added par. (7).

1982—Subsec. (a)(1). Puspan. L. 97–354, § 5(a)(31)(A), redesignated subpar. (C) as (B). Former subpar. (B), relating to an electing small business corporation, was struck out.

Subsec. (a)(3). Puspan. L. 97–354, § 5(a)(31)(B), substituted “paragraph (1)(B)” for “paragraph (1)(C)” in span and text.

Subsec. (c)(2). Puspan. L. 97–354, § 5(a)(31)(C), substituted “an S corporation” for “an electing small business corporation” the first place appearing and “the S corporation” for “an electing small business corporation” the second place appearing.

Subsec. (c)(3)(B)(ii). Puspan. L. 97–354, § 5(a)(31)(D), substituted “an S corporation” for “electing small business corporation (as defined in section 1371(span))”.

Subsec. (c)(4)(A). Puspan. L. 97–354, § 5(a)(31)(E), substituted “subsection (a)(1)(B)” for “subsection (a)(1)(C)”.

1980—Subsec. (a)(1)(C), (3). Puspan. L. 96–222, § 102(a)(1)(A), struck out in par. (1)(C) “(determined by reference to the rules contained in section 318 rather than under section 544)” after “of section 542(a)” and added par. (3).

Subsec. (span)(5). Puspan. L. 96–222, § 102(a)(1)(D)(iii), substituted “to which subsection (a) applies” for “to which this section applies”.

Subsec. (c)(3)(D). Puspan. L. 96–222, § 102(a)(1)(D)(ii), struck out provisions relating to equipment leasing by closely-held corporations.

Subsec. (c)(4) to (6). Puspan. L. 96–222, § 102(a)(1)(D)(i), added pars. (4) to (6).

Subsec. (d). Puspan. L. 96–222, § 102(a)(1)(B), inserted “(determined without regard to subsection (e)(1)(A)” after “from such activity”.

Subsec. (e)(2)(A). Puspan. L. 96–222, § 102(a)(1)(C), inserted “by reason of losses” after “with respect to the activity”.

1978—Puspan. L. 95–600, § 201(c)(1), substituted “Deductions limited to amount at risk” for “Deductions limited to amount at risk in case of certain activities” in section catchline.

Subsec. (a). Puspan. L. 95–600, § 202, redesignated existing provisions as par. (1), substituted provisions relating to limitations with respect to an individual, an electing small business corporation defined under section 1371(span) of this title, and a corporation meeting the stock ownership requirements of section 542(a)(2) of this title and the rules of section 318 of this title, for provisions relating to limitations with respect to a taxpayer other than a corporation which is neither an electing small business corporation defined under section 1371(span) of this title, nor a personal holding company defined under section 542 of this title, and added par. (2).

Subsec. (c)(1)(E). Puspan. L. 95–618, § 402(d)(1), added subpar. (E).

Subsec. (c)(2)(E). Puspan. L. 95–618, § 402(d)(2), added subpar. (E).

Subsec. (c)(3). Puspan. L. 95–600, § 201(a), added par. (3).

Subsec. (d). Puspan. L. 95–600, § 701(k)(2), substituted “(determined without regard to the first sentence of subsection (a))” for “(determined without regard to this section)”.

Subsec. (e). Puspan. L. 95–600, § 203, added subsec. (e).

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Amendment by Puspan. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13512(c) of Puspan. L. 115–97, set out as a note under section 453B of this title.

Effective Date of 2014 Amendment

Amendment by Puspan. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(span) of Puspan. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2004 Amendment

Amendment by Puspan. L. 108–357 applicable to taxable years of foreign corporations beginning after Dec. 31, 2004, and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end, see section 413(d)(1) of Puspan. L. 108–357, set out as an Effective and Termination Dates of 2004 Amendments note under section 1 of this title.

Effective Date of 1990 Amendment

Amendment by section 11813(span)(15) of Puspan. L. 101–508 applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section 49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of this title, and any property described in section 46(span)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) of Puspan. L. 101–508, set out as a note under section 45K of this title.

Effective Date of 1986 Amendment

Amendment by section 201(d)(7)(A) of Puspan. L. 99–514 applicable to property placed in service after Dec. 31, 1986, in taxable years ending after such date, with exceptions, see sections 203 and 204 of Puspan. L. 99–514, set out as a note under section 168 of this title.

Amendment by section 201(d)(7)(A) of Puspan. L. 99–514 not applicable to any property placed in service before Jan. 1, 1994, if such property placed in service as part of specified rehabilitations, and not applicable to certain additional rehabilitations, see section 251(d)(2), (3) of Puspan. L. 99–514, set out as a note under section 46 of this title.

Puspan. L. 99–514, title V, § 503(c), Oct. 22, 1986, 100 Stat. 2244, provided that:

“(1)In general.—Except as provided in this subsection, the amendments made by this section [amending this section] shall apply to losses incurred after December 31, 1986, with respect to property placed in service by the taxpayer after December 31, 1986.

“(2)Special rule for losses of s corporation, partnership, or pass-thru entity.—In the case of an interest in an S corporation, a partnership, or other pass-thru entity acquired after December 31, 1986, the amendments made by this section shall apply to losses after December 31, 1986, which are attributable to property placed in service by the S corporation, partnership, or pass-thru entity on, before, or after January 1, 1986.

“(3)Special rule for athletic stadium.—The amendments made by this section shall not apply to any losses incurred by a taxpayer with respect to the holding of a multi-use athletic stadium in Pittsburgh, Pennsylvania, which the taxpayer acquired in a sale for which a letter of understanding was entered into before April 16, 1986.”

Amendment by section 1011(span)(1) of Puspan. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 1011(c)(1) of Puspan. L. 99–514, set out as a note under section 453B of this title.

Effective Date of 1984 Amendment

Puspan. L. 98–369, div. A, title IV, § 432(d), July 18, 1984, 98 Stat. 815, as amended by Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1983; except that any loss from an activity described in section 465(c)(7)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by this section) which (but for the amendments made by this section) would have been treated as a deduction for the taxpayer’s first taxable year beginning after December 31, 1983, under section 465(a)(2) of such Code shall be allowed as a deduction for such first taxable year notwithstanding such amendments.”

Amendment by section 721(x)(2) of Puspan. L. 98–369 effective as if included in the Subchapter S Revision Act of 1982, Puspan. L. 97–354, see section 721(y)(1) of Puspan. L. 98–369, set out as a note under section 1361 of this title.

Effective Date of 1982 Amendment

Amendment by Puspan. L. 97–354 applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) of Puspan. L. 97–354, set out as an Effective Date note under section 1361 of this title.

Effective Date of 1980 Amendment

Amendment by Puspan. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Puspan. L. 95–600, to which such amendment relates, see section 201 of Puspan. L. 96–222, set out as a note under section 32 of this title.

Effective Date of 1978 Amendment

Amendment by Puspan. L. 95–618 applicable with respect to wells commenced on or after Oct. 1, 1978, in taxable years ending on or after such date, see section 402(e) of Puspan. L. 95–618, set out as a note under section 263 of this title.

Puspan. L. 95–600, title II, § 204(a), Nov. 6, 1978, 92 Stat. 2817, provided that: “The amendments made by this subtitle [amending this section and section 704 of this title and enacting provisions set out as notes under this section and section 704 of this title] shall apply to taxable years beginning after December 31, 1978.”

Puspan. L. 95–600, title VII, § 701(k)(3), Nov. 6, 1978, 92 Stat. 2906, provided that: “The amendments made by this subsection [amending this section and provisions set out below] shall take effect on October 4, 1976.”

Effective Date and Transitional Rules

Puspan. L. 94–455, title II, § 204(c), Oct. 4, 1976, 90 Stat. 1532, as amended by Puspan. L. 95–600, title VII, § 701(k)(1), Nov. 6, 1978, 92 Stat. 2906; Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(1)In general.—Except as provided in paragraphs (2) and (3), the amendments made by this section [enacting this section] shall apply to losses attributable to amounts paid or incurred in taxable years beginning after December 31, 1975. For purposes of this subsection, any amount allowed or allowable for depreciation or amortization for any period shall be treated as an amount paid or incurred in such period.

“(2)Special transitional rules for movies and video tapes.—

“(A)In general.—In the case of any activity described in section 465(c)(1)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], the amendments made by this section shall not apply to—

“(i) deductions for depreciation or amortization with respect to property the principal production of which began before September 11, 1975, and for the purchase of which there was on September 11, 1975, and at all times thereafter a binding contract, and

“(ii) deductions attributable to producing or distributing property the principal production of which began before September 11, 1975.

“(B)Exception for certain agreements where principal photography begin before 1976.—In the case of any activity described in section 465(c)(1)(A) of the Internal Revenue Code of 1986, the amendments made by this section shall not apply to deductions attributable to the producing of a film the principal photography of which began on or before December 31, 1975, if—

“(i) on September 10, 1975, there was an agreement with the director or a principal motion picture star, or on or before September 10, 1975, there had been expended (or committed to the production) an amount not less than the lower of $100,000 or 10 percent of the estimated costs of producing the film, and

“(ii) the production takes place in the United States.

Subparagraph (A) shall apply only to taxpayers who held their interests on September 10, 1975. Subparagraph (B) shall apply only to taxpayers who held their interests on December 31, 1975.

“(3)Special transitional rules for leasing activities.—

“(A)Rule for leases other than operating leases.—In the case of any activity described in section 465(c)(1)(C) of the Internal Revenue Code of 1986, the amendments made by this section shall not apply with respect to—

“(i) leases entered into before January 1, 1976, and

“(ii) leases where the property was ordered by the lessor or lessee before January 1, 1976.

“(B)Holding of interests for purposes of subparagraph (a).—Subparagraph (A) shall apply only to taxpayers who held their interests in the property on December 31, 1975.

“(C)Special rule for operating leases.—In the case of a lease described in section 46(e)(3)(B) of the Internal Revenue Code of 1986—

“(i) subparagraph (A) shall be applied by substituting ‘May 1, 1976’ for ‘January 1, 1976’ each place it appears therein, and

“(ii) subparagraph (B) shall be applied by substituting ‘April 30, 1976’ for ‘December 31, 1975’.”

Savings Provision

For provisions that nothing in amendment by Puspan. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(span) of Puspan. L. 101–508, set out as a note under section 45K of this title.

Transitional Rules for Recapture Provisions and Leasing Activities

Puspan. L. 95–600, title II, § 204(span), Nov. 6, 1978, 92 Stat. 2817, as amended by Puspan. L. 96–222, title I, § 102(a)(1)(E), Apr. 1, 1980, 94 Stat. 208; Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(1)Recapture provisions.—If the amount for which the taxpayer is at risk in any activity as of the close of the taxpayer’s last taxable year beginning before January 1, 1979, is less than zero, section 465(e)(1) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by section 203 of this Act) shall be applied with respect to such activity of the taxpayer by substituting such negative amount for zero.

“(2)Special transitional rules for leasing activities.—

“(A)Rule for leases.—In the case of any activity described in section 465(c)(1)(C) of such Code in which a corporation described in section 465(a)(1)(C) of such Code is engaged, the amendments made by this subtitle [amending sections 465 and 704 of this title and enacting provisions set out as notes under sections 465 and 704 of this title] shall not apply with respect to—

“(i) leases entered into before November 1, 1978, and

“(ii) leases where the property was ordered by the lessor or lessee before November 1, 1978.

“(B)Holding of interests for purposes of subparagraph (a).—Subparagraph (A) shall apply only to taxpayers who held their interests in the property on October 31, 1978.”