In what order are the loss limitations for partnerships applied?
A)Tax basis; at-risk amount; passive activity loss
B)Passive activity loss; tax basis; at-risk amount
C)Tax basis; passive activity loss; at-risk amount
D)At-risk amount; tax basis; passive activity loss

Question

Quizplus · Accepted Answer

The correct order for applying loss limitations for partnerships is first the tax basis, then the at-risk amount, and finally the passive activity loss limitations. This sequence ensures that a partner can only deduct losses to the extent they have economic investment in the partnership, are financially at risk for the investment, and are actively participating in the partnership's activities, respectively.

In What Order Are the Loss Limitations for Partnerships Applied