Partner Loss Limitations
Deductibility of Partnership Losses
Partners may deduct partnership losses only to the extent permitted by several statutory limitations. Outside basis, at-risk rules, passive activity rules, and other limitations determine whether losses are currently deductible.
- Outside basis limitation.
- At-risk limitation.
- Passive activity limitation.
- Excess business loss limitation where applicable.
- Suspended losses may be deductible in future years.
Note
Loss limitations are commonly tested in multi-step CPA REG computational questions.
Summary
Multiple tax rules determine whether partnership losses may be deducted currently.