You can reduce income reported on your return by deducting allowable losses from either of these:
The deduction is limited to the money you have at risk in the activity.
The at-risk amount is usually equal to the combined total of these:
The at-risk amount usually doesn't include:
The at-risk rules apply to:
If some of the money you invested isn't at risk, use Form 6198 to figure your allowable loss.
To learn more, see Publication 925: Passive Activity and At-Risk Rules at www.irs.gov.