Investment Tax Credit (ITC) At-Risk Rules

Before the Tax Reform Act of 1986, the tax law provided an at-risk limitation on losses from business and income-producing activities other than real estate and certain corporate business activities.

The amount at risk is generally the sum of:

• the taxpayer's cash contributions to the activity,

• the adjusted basis of other property contributed to the activity, and

• amounts borrowed for use in the activity for which the taxpayer has personal liability or has pledged property not used in the activity.

The ITC at-risk rules limit the credit base of property used in an activity that is subject to the loss limitation at-risk rules. They generally provide that you treat nonrecourse debt on real property as an amount at risk for investment credit purposes.

The at-risk limitation amounts must be less than or equal to the acquisition value. The at-risk limitation is used to calculate tax credits. The tax credit should equal the at-risk amount multiplied by the credit percentage.

The application assumes the acquired value of an asset in the Tax book to be the amount at risk. If it is not, you may need to override the ITC amount the system calculates in Asset Detail.