How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Anne Your Own Question
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2421
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Type Your Tax Question Here...
Anne is online now
A new question is answered every 9 seconds

tax shelters like at-risk provisions and section 469 - passive

Customer Question

tax shelters like 'at-risk provisions' and section 469 - passive activity rule - what to these limitations apply to - deductions in general or only section 162 type activities, - what is the relation between tax shelters and depreciation ?
Submitted: 4 years ago.
Category: Tax
Expert:  Anne replied 4 years ago.

Thank you for using justanswer.

7001 Tax Shelters


A tax shelter is an activity providing deductions and/or credits to an investor which will reduce tax liability with respect to income from other sources.


This means that the losses are not limited only to the section 162 income.



Investments in tax shelters have been restricted by the at-risk rules and the passive activity rules. Essentially all limited partnership investments, rental properties, and businesses in which an owner does not materially participate have been affected.


¶7125 At-Risk Rules

The at-risk rules disallow losses that are in excess of an investor’s amount at risk. In a general sense, at risk is the amount of investment that an investor could possibly lose.


As for depreciation, a further limitation imposed by the 1986 Tax Reform Act is that investors who don't actively manage their properties can't use their passive losses to shelter any active income. This means that investors who purchased shares in limited partnerships or similar investments can no longer use these paper losses from depreciation as a shelter against other income.



I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.