Series 22: At-Risk Limit

At-Risk Limit

Investors in an equipment leasing program may deduct losses from their other sources of passive income at the end of the tax year only to the extent they are “at risk” for those activities. This means that investors may only deduct losses up to the amount they have invested. Any additional loss is called a suspended loss. A suspended loss may be carried into future years for use should the investor’s cost basis increase sufficiently to absorb the loss.

In the case of a leveraged lease, a non-recourse loan adds to an investor’s cost basis in proportion to its share of the program’s total capital investment. Interest payments on the loan are included among the investor’s expenses. However, since the investor is not personally liable for repayment of a non-recourse loan, the IRS does not