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Treasury Regulations · 26 CFR

§ 7.465-5. Examples.

In effect eCFR current as of October 15, 2026

Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).

Regulation under 26 U.S.C. § 465

Cite as 26 CFR § 7.465-5

At a glance

Read from the text and its source citation. Not part of the regulation.

Status
In the current eCFR
Issued
August 22, 1977 by T.D. 7504
Issued under
26 U.S.C. § 465
Length
459 words · about 2 min to read
Cross-references
cites 1 Code section and 2 regulations; cited by 0

The provisions of § 7.465-1 and § 7.465-2 may be illustrated by the following examples:

Example (1).

J and K, as equal partners, form partnership JK on January 1, 1975. Partnership JK is engaged solely in an activity described in section 465(c)(1). On January 1, 1975, each partner contributes $10,000 in cash from personal assets to JK. On July 1, 1975, JK borrows $40,000 (of which J's share is $20,000) from a bank under a nonrecourse financing arrangement secured only by the new equipment (for use in the activity) purchased with the $40,000. On September 1, 1975, JK reduces the amount due on the loan to $36,000 (of which J's share is $18,000). On October 1, 1975, JK distributes $3,000 to each partner. For taxable year 1975, JK has no income or loss. Although J's basis in the activity is $25,000 ($10,000 + $18,000—$3,000) J's amount at risk on the effective date is $7,000 determined as follows:

Initial amount at risk$10,000
Plus: Items which increased basis other than amounts described in sec. 465(b) (3) or (4)0
Total10,000
Less: Distribution3,000
J's amount at risk on effective date7,000
Example (2).

Assume the same facts as in Example (1) except that JK has a loss (as described in section 465(d) for 1975 of which J's share is $12,000. Although J's basis in the activity is $13,000 ($10,000 + $18,000—($3,000 + $12,000)) J's amount at risk on the effective date is $7,000 determined as follows:

Initial amount at risk$10,000
Plus: Items which increased basis other than amounts described in sec. 465(b) (3) or (4)0
Total10,000
Less: Distribution3,000
Portion of loss ($12,000) in excess of portion of basis not at risk ($18,000)0
Total3,000
J's amount at risk on effective date7,000
Example (3).

Assume the same facts as in Example (1) except that JK has a loss (as described in section 465(d) for 1975, and J's share is $23,000. J's basis in the activity is $2,000 ($10,000 + $18,000—($3,000 + $23,000)). The amount at risk on the effective date is determined as follows:

Initial amount at risk$10,000
Plus: Items which increased basis other than amounts described in sec. 465(b) (3) or (4)0
Total10,000
Less: Distribution3,000
Portion of loss ($23,000) in excess of portion of basis not at risk ($18,000)5,000
Total8,000
J's amount at risk on the effective date2,000

[T.D. 7504, 42 FR 42198, Aug. 22, 1977]

Other regulations under § 465

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

Amendment history

From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.

  1. Issued by T.D. 7504 (42 FR 42198)

Where it sits in 26 CFR

  1. Subchapter A Income tax
  2. Part 7 Temporary income tax regulations under the tax reform act of 1976

Nearby sections