Investor · Idaho Falls, ID · Member since 2016 · 935 posts · 629 votes
So if I have a tax loss due to depreciation, etc., when I get asked on the tax software if the Business Investment is at risk, what is the correct answer? Is it All at Risk, Some at risk, or N/A? I have a hard time answering this because sure, it is an investment and therefore is at risk, all my tenants could move out and I could possibly never get it rented again, even though that isn't likely. It is renting just fine and therefore I am tempted to answer N/A, but since there is always some risk involved, I am curious if I am to answer "Some Investment is not at risk." This is my first rental I acquired in 2017 and therefore my first time including it on my tax returns. When I've had other business losses in the past, such as my wife's Real Estate business as a Realtor, I typically answer N/A since there are no real assets involved.
I appreciate any insight in what other more seasoned professionals tend to go with on that answer. Thanks!
Other answers will limit your ability to deduct your losses in rare cases when you're protected from financial losses - such as non-recourse debt, special clauses etc.
That question is typically asked to determine if you are financing the property with non recourse debt. I will assume that you are personally liable for the debt (assuming you have debt) that specifically financed your acquisition of the rental property. If so then you should have at risk status for that rental property
Other answers will limit your ability to deduct your losses in rare cases when you're protected from financial losses - such as non-recourse debt, special clauses etc.
You are at risk because if you lose your tenant - you would still be required to pay for the mortgage until it is paid off since your personally liable for it.
In the chance that it was non-recourse - the answer to the question may have been different.