8703 / How do the passive loss rules interact with the at-risk rules?

When determining whether a loss deduction will be allowed, the taxpayer must first apply the at risk rules. If a deduction is disallowed in one year under the at risk rules (see Q 8689 to Q 8694), it generally cannot be deducted as a loss under the passive activity rules.¹ Therefore, the loss will be suspended under the at risk rules, and can be carried forward to the succeeding tax year if the taxpayer has sufficient amounts “at risk” in that later tax year.

1.  Temp. Treas. Reg. § 1.469-2T(d)(6)(i).