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TITLE 26-INTERNAL REVENUE CODE described in subparagraph (A), (B), (C), or (D) if the interest in the partnership or the enterprise is attributable to the active par- ticipation of the individual described in sub- paragraph (A), (B), (C), or (D). For purposes of subparagraph (A), where one farm is substituted for or added to another farm, both farms shall be treated as one farm, (d) Exceptions Subsection (a) shall not apply to- (1) any amount paid for supplies which are on hand at the close of the taxable year on account of fire, storm, flood, or other casualty or on account of disease or drought, or (2) any amount required to be charged to capital account under section 278. (e) Definitions For purposes of this section- (1) Farming The term "farming" means the cultivation of land or the raising or harvesting of any ag- ricultural or horticultural commodity includ- ing the raising, shearing, feeding, caring for, training, and management of animals. For purposes of the preceding sentence, trees (other than trees bearing fruit or nuts) shall not be treated as an agricultural or horticul- tural commodity. (2) Limited entrepreneur The term "limited entrepreneur" means a person who- (A) has an interest in an enterprise other than as a limited partner, and (B) does not actively participate in the management of such enterprise. (Added Pub. L. 94-455, title II, § 207(a)(1), Oct. 4, 1976, 90 Stat. 1536.) EFFECTIvE DATE Section 207(a)(3) of Pub. L. 94-455 provided that: "(A) In general.-Except as provided in subpara- graph (B), the amendments made by this subsection [adding this section and amending analysis preceding section 461 of this title] shall apply to taxable years beginning after December 31, 1975. "(B) Transitional rule.-In the case of a farming syn- dicate in existence on December 31, 1975, and for which there was no change of membership through- out its taxable year beginning in 1976, the amend- ments made by this subsection shall apply to toxable years beginning after December 31, 1976." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 278, 465 of this title. § 465. Deductions limited to amount at risk in case of certain activities (a) General rule In the case of a taxpayer (other than a corpo- ration which is neither an electing small busi- ness 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 re- spect 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 adjust. ed basis of other property contributed by the taxpayer to the activity, and (B) amounts borrowed with respect to such activity (as determined under para- graph (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 se- curity if such property is directly or indirect- ly 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). (4) Exception Notwithstanding any other provision of this section, a taxpayer shall not be considered at risk with respect to amounts protected against loss through nonrecourse financing, guarantees, stop loss agreements, or other similar arrangements. (5) Amounts at risk in subsequent years If in any taxable year the taxpayer has a loss from an activity to which this section ap- plies, the amount with respect to which a tax- payer is considered to be at risk (within the meaning of subsection (b)) in subsequent tax- able years with respect to that activity shall be reduced by that portion of the loss which (after the application of subsection (a)) is al- lowable as a deduction. (c) Activities to which section applies (1) Types of activities This section applies to any taxpayer en- gaged in the activity of- (A) holding, producing, or distributing motion picture films or video tapes, (B) farming (as defined in section 464(e)), (C) leasing any section 1245 property (as defined in section 1245(a)(3)), or Page 369 §4,65