Discussion Question 10-12 (LO. 12)

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Answer the following questions regarding the limitations that apply to the deductibility of a loss from a partnership.

a. Regarding the limitations that apply to the deductibility of a loss from a partnership, label each of the following as being either "True" or "False".

	A partner must have sufficient basis to deduct a loss.
	A partner must be sufficiently at-risk to deduct a loss.
	A passive loss is deductible if the partner has sufficient basis, is at-risk, and has sufficient passive income from other activities.
	Losses that cannot be deducted are suspended and carried back.
	The at-risk limitations limit the losses to the amounts the partner could actually lose if the partnership were to liquidate in bankruptcy.
	If a loss passes the basis, at-risk, and passive activity loss limitations, a noncorporate taxpayer must consider whether the excess business loss limitation might apply.

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b. Complete the statement below, placing the limitations in the correct order.

The order of the limitations that apply to the deductibility of a loss from a partnership are:

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c. Why do these rules exist?

The loss limitation rules exist to provide some assurance that a partner

a loss or deduction for which the partner

no economic risk of loss.