If a Partnership Allocates Losses to the Partners, the Partners

question 46

True/False

If a partnership allocates losses to the partners, the partners must first apply the passive loss limitations, then the basis limitation, and finally the at-risk limitations. If all three hurdles are met, the partner may deduct the loss.

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Definitions:

Future Liability

A financial obligation or debt that a company is required to pay at a future date.

Income Tax Expense

The total amount of income tax a company is required to pay to the government, reflected as an expense in its income statement.

Deferred Tax Asset Valuation Allowance

A contra-asset account used to decrease the value of deferred tax assets if it is more likely than not they will not be realized.