7863 / How do the “at risk” rules affect a limited partner’s interest in an oil and gas program?

In preparing income tax returns for any tax year, a limited partner is permitted to offset the allocated share of tax deductions generated by the partnership against the allocated share of income of the partnership. This is permitted regardless of the limited partner’s “amount at risk” in the partnership. However, should the share of tax deductions (including the share of any partnership loss) exceed the share of partnership income (if any), the limited partner will be permitted to offset the excess of such deductions (i.e., the losses) against the income received from other sources only to the extent the limited partner is “at risk” in the partnership at the close of the year¹ (see Q 8006). If an individual owns limited interests in more than one oil and gas partnership (or owns limited interests in other types of tax shelters), each partnership interest must be treated separately for purposes of the at risk limitations; no aggregation of “amounts at risk” in different partnerships is permitted.² However, until otherwise provided, a partnership is permitted to aggregate its oil and gas properties for purposes of the at risk limitation³ (see Q 8007).