At Risk Rules


M

Michelle Kapp

On the bottom of schedule C we have to check the at risk box
to determine if our loss can be used against our other w-2
income on our 1040. This is a small cash business that has
no loans, inventory, or assets that haven't been totally
depreciated. The loss is $2000...we spent $2000 more of our
cash out than we took in....Is our investment at risk?...is
this the 2000 of cash we didn't get back?....thank you.
 
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H

Harlan Lunsford

Michelle said:
On the bottom of schedule C we have to check the at risk box
to determine if our loss can be used against our other w-2
income on our 1040. This is a small cash business that has
no loans, inventory, or assets that haven't been totally
depreciated. The loss is $2000...we spent $2000 more of our
cash out than we took in....Is our investment at risk?...is
this the 2000 of cash we didn't get back?....thank you.
UH... who is "we"?

schedule C is used to report operations of a proprietor,
i.e. single owner of a business.

So, if it's your business, and if you bear all the burden of
paying the bills, then you are at risk.

Cheer$,
Harlan Lunsford, EA n LA
 
A

A.G. Kalman

Michelle said:
On the bottom of schedule C we have to check the at risk box
to determine if our loss can be used against our other w-2
income on our 1040. This is a small cash business that has
no loans, inventory, or assets that haven't been totally
depreciated. The loss is $2000...we spent $2000 more of our
cash out than we took in....Is our investment at risk?...is
this the 2000 of cash we didn't get back?....thank you.
The Sched. C instructions on page 6 for line 32 contain
the list of items that would be considered not at risk:
http://www.irs.gov/pub/irs-pdf/i1040sc.pdf
 
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S

Seth Breidbart

Michelle Kapp said:
On the bottom of schedule C we have to check the at risk box
to determine if our loss can be used against our other w-2
income on our 1040. This is a small cash business that has
no loans, inventory, or assets that haven't been totally
depreciated. The loss is $2000...we spent $2000 more of our
cash out than we took in....Is our investment at risk?...is
this the 2000 of cash we didn't get back?....thank you.
In simple English, "not at risk" means the money can't
actually come out of your pocket (for instance, it was
borrowed under terms that say it gets paid back only from
business profits, so you're not at risk of losing it if the
business doesn't make profits). Since you actually paid out
the $2000 you clearly were at risk of losing it (and you
did).

Seth
 

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