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Subject Topic: Chap 4 partnership confusion (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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Jams
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Posted: 18 Jul 2008 at 13:06 | IP Logged  

becker chapter 4
Q62
At-risk limitation provisions of the IRC may limit
i. A partners deduction for his share of partnership losses
ii. A partnership's net operation loss carryover
a)i only
b)ii only
c)both
d)neither
answer is "a"..reason being a partner's tax deduction for his share of partnership losses is limited to his basis. Any unused loss can be carried forward until basis become available.
ok i buy that answer, but how now in this another question from same chapter contradicts the answer given before..here it goes

Q179. which of the following limitations apply in determining a partner's deduction for that partner share of partnership losses?
  At-rsik  Passive loss
a) yes     no
b) no       yes
c) yes      yes
d)no        no
answer is surprisingly "c"...how come ?????


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frshk1
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Posted: 18 Jul 2008 at 14:07 | IP Logged  

Jams wrote:
becker chapter 4
Q62
At-risk limitation provisions of the IRC may limit
i. A partners deduction for his share of partnership losses
ii. A partnership's net operation loss carryover
a)i only
b)ii only
c)both
d)neither
answer is "a"..reason being a partner's tax deduction for his share of partnership losses is limited to his basis. Any unused loss can be carried forward until basis become available.
ok i buy that answer, but how now in this another question from same chapter contradicts the answer given before..here it goes

Q179. which of the following limitations apply in determining a partner's deduction for that partner share of partnership losses?
  At-rsik  Passive loss
a) yes     no
b) no       yes
c) yes      yes
d)no        no
answer is surprisingly "c"...how come ?????

Question 179-
NOL and Passive Activity NL are TWO very different things. Passive losses are deductible only against passive activity income. So, if the partnership had any PA Income the PAL would be "deducted" against that. So PAL matters.

At Risk is your Capital Account + % of liablilities YOU (that partner) are responsible for. You may NOT deduct in excess of whatever that amount may be, no matter how much your actual share of partnership loss may have been. So they both limit deductibily.

Q62-
NOL (regular activity income NOT PASSIVE) is free to move about in previous years and future years to be offset against ANYTHING.. regular operating income, passive activity income, capital gains.. anything. the only limitation is the time period. i belive it is carried back 2 years and carry forward 20 years- though off the top of my head i can not say right now.



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Chris40589
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Posted: 18 Jul 2008 at 14:08 | IP Logged  

Jams,

Both answers indicate that a partner's share of partnership losses may be limited if the partner does not have basis to take those losses.  A partner's share of partnership losses could also be limited if the losses are generated from a passive activity.  Passive activity losses can only be used to offset other passive income.  That means if the partner has no other passive income, then the losses must be carried forward until there is passive income to offset the losses.  Let me know if this isn't clear.  Passive Activity Loss rules and At-Risk limitations can be pretty sticky areas.   

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Jams
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Posted: 18 Jul 2008 at 14:15 | IP Logged  

oh my god..why i couldn't see that difference..its passive losses..oops. my bad. thank you guys, you are awesome in clearing the doubts. it's such a hard time for me, going through so many MCQ's. i am going crazy.its just that, this is awful that we have to remember so many numbers and rules, honestly i feel rules are fine, but few numbers to memorize its just too much to ask for..and i really dont see any point, because they mention that these numbers change every year. but without knowing the upper limit of any deduction, its impossible to answer few questions, so no matter how dump it is, you gotta know the number..gossh. thanks again. good luck. 

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CPA_Starter
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Posted: 06 Aug 2009 at 15:03 | IP Logged  

what is "at risk" provision?

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