What is the correct order of the loss limitation rules?
A) passive loss limits, at-risk amount, tax basis
B) tax basis, at-risk amount, passive loss limits
C) passive loss limits, tax basis, at-risk amount
D) at-risk amount, tax basis, passive loss limits
E) tax basis, passive loss limits, at-risk amount

Question

Quizplus · Accepted Answer

The correct order is tax basis, at-risk amount, and then passive loss limits. This sequence ensures that losses are limited first by the taxpayer's investment in the activity, then by the amount they are financially at risk, and finally by passive activity loss rules.

What Is the Correct Order of the Loss Limitation Rules