At risk not at risk

[feiderbfrn]

We run a very very small cattle operation.  The land used to run the operation is paid for, all operations are paid for with cash.  Nothing is financed.  If we ceased to operate tomorrow, we would have no bills that need to be paid and could sell our cattle to get money back out of the business.  Should we classify as "at risk" or "not at risk"?  It seems to me it should be not at risk as we would not be required to pay out any cash if our operation ceased to exist any more.  Please advise.  The IRS Publication is confusing and only deals with loans and such.

[AmyT · Accepted solution]

If you actively participate in the operation, you are not subject to the at-risk rules.  In general, these rules only apply to a business activity in which you are considered to be a passive participant.

This article does a nice job of explaining how the at-risk rules apply to farming activites (and is not in IRS-speak): https://ruraltax.org/files-ou/At_Risk_Rules.pdf

[YQ]

I receive K1 from a partnership LLC. I am not involved in the operation of the business. Does the At-Risk Rules apply to my investment? When I use Turbotax for my tax return, it ask me to answer questions to calculate at risk limitations. I am not sure of the answers. And different answers  may have different result.

Anyone can help?

Thanks.