8007 / May a limited partner aggregate amounts at risk in different tax shelters in order to determine allowable deductions?

No. The IRC requires that a limited partner apply the “at risk” limitations separately with respect to each limited partnership interest owned. The IRC also grants the Treasury Department authority to issue regulations requiring aggregation or separation of activities subject to the at risk rules.¹

Treasury exercised this authority on June 5, 1979, by publishing a full set of proposed regulations under IRC Section 465. With respect to the aggregation or separation of activities for purpose of the at risk limitations, these proposed regulations provide that an “S corporation shareholder” may aggregate and treat as a single activity the categories of activities listed in the final sentence of the following paragraph. In addition to the listed activities, in the case of an S corporation, all activities with respect to IRC Section 1245 properties that are leased or held for lease and are placed in service in a tax year of the corporation are treated as a separate activity.²

Furthermore, should one of the taxpayer’s limited partnerships be engaged in more than one activity covered by the at risk rules (e.g., oil exploration and equipment leasing), the taxpayer is generally required to treat each covered activity as a separate activity for purposes of applying the at risk limitations.³ However, until otherwise provided, partnerships and S corporations can aggregate activities within each of certain categories for purposes of the at risk rules. The categories within which aggregation is permitted are oil and gas properties, geothermal properties, farms, and films and video tapes.⁴

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Planning Point: The “covered activities” mentioned in the third paragraph above were expanded by Section 201 of the ‘78 Revenue Act to all activities other than real estate.⁵

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