Form 6198 calculates the amount of loss you can deduct from an activity for which you are not completely at risk.
You should carry this amount from line 21 to the relevant tax form. The forms that can be affected by the at-risk limitations have instructions about how and where to enter this amount. Please see the specific form and its "Explain This Form" for more help.
The Tax Code generally limits your loss from an activity to the amount you have "at risk" in the activity. The purpose of this at-risk limitation is to keep you from taking a tax deduction that isn't matched by an actual economic loss.
An example of a transaction limited by the at-risk rules involves what is known as a "non-recourse" loan secured by property used in the activity. Under this type of arrangement, the lender's only recourse, if the loan is not paid, is to take the property securing the loan. If the property's value is insufficient to satisfy the balance due on the loan, the lender is unable to proceed against the borrower for the difference. Since the borrower isn't personally liable to repay the loan, his amount at risk is zero, and he can't take a loss with respect to the activity.
The at-risk rules apply to individuals and certain closely-held corporations with respect to investments in activities engaged in as trades or businesses or for the production of income. This includes investments by partners in partnerships that have such activities.
The at-risk rules may apply to you if you have an investment in such an activity and the activity has been financed by a loan for which you are not liable (such as a non-recourse loan, a loan guaranteed by someone else, or any other arrangement that protects you from losses) or if the loan was made by a party that has an interest in the activity.
There are a number of important exceptions to the at-risk rules, including holding real property placed in service before 1987 and certain nonrecourse loans from banks that are secured by real estate.
The at-risk rules and the exceptions thereto are very complicated. For more information on the at-risk rules, see the IRS instructions for Form 6198 and IRS Publication 925, "Passive Activity and At-Risk Rules."