Page:United States Statutes at Large Volume 90 Part 2.djvu/63

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1531

tract entered into before January 1, 1978, and rehabilitation expenditures incurred with respect to low-income rental housing the rehabilitation of which has begun before January 1, 1978, shall be deemed incurred before January 1, 1978." (b) EFFECTIVE DATE.—The amendments made by paragraphs (1), (3), and (4) of subsection (a) shall apply to expenditures paid or incurred after December 31, 1975, and before January 1, 1978, and expenditures made pursuant to a binding contract entered into before January 1, 1978. The amendment made by paragraph (2) of subsection (a) shall apply to expenditures incurred after December 31, 1975.

26 USC 167 note,

SEC. 204. LIMITATIONS ON DEDUCTIONS FOR EXPENSES.

(a) IN GENERAL.—Subpart C of part II of subchapter E of chapter 1 (relating to taxable year for which deduction is taken) is amended by adding at the end thereof the following new section: "SEC. 465. DEDUCTIONS LIMITED TO AMOUNT AT RISK IN CASE OF CERTAIN ACTIVITIES. "(a) GENERAL RULE.—In the case of a taxpayer (other than a cor-

poration which is neither an electing small business corporation (as defined in section 1371(b)) nor a personal holding company (as defined in section 542)) engaged in an activity to which this section applies, any loss from such activity for the taxable year shall be allowed only to the extent of the aggregate amount with respect to which the taxpayer is at risk (within the meaning of subsection (b)) for such activity at the close of the taxable year. Any loss from such activity not allowed under this section for the taxable year shall be treated as a deduction allocable to such activity in the first succeeding taxable year. "(b) AMOUNTS CONSIDERED AT RISK.—

" (1) IN GENERAL.—For purposes of this section, a taxpayer shall be considered at risk for an activity with respect to amounts including— "(A) the amount of money and the adjusted basis of other property contributed by the taxpayer to the activity, and "(B) amounts borrowed with respect to such activity (as determined under paragraph (2)). "(2) BORROWED AMOUNTS.—For purposes of this section, a taxpayer shall be considered at risk with respect to amounts borrowed for use in an activity to the extent that he— "(A) is personally liable for the repayment of such amounts, or "(B) has pledged property, other than property used in such activity, as security for such borrowed amount (to the extent of the net fair market value of the taxpayer's interest in such property). No property shall be taken into account as security if such property is directly or indirectly financed by indebtedness which is secured by property described in paragraph (1). "(3) CERTAIN BORROWED AMOUNTS EXCLUDED.—For purposes of

paragraph (1)(B), amounts borrowed shall not be considered to be at risk with respect to an activity if such amounts are borrowed from any person who— "(A) has an interest (other than an interest as a creditor) in such activity, or "(B) has a relationship to the taxpayer specified within any one of the paragraphs of section 267(b).

26 USC 465. L

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