L is the sole shareholder and an employee of LDI Incorporated.The corporation manufactures custom-made kitchen cabinets.L currently owns an interest in a limited partnership in which he expects to generate losses for the next several years.Assuming L transfers the interest in the partnership to the corporation, any losses of the partnership may be used to reduce the corporation's operating income.

Question

Quizplus · Accepted Answer

If L transfers the interest in the partnership to the corporation, the losses of the partnership can be used by the corporation to offset its income and reduce its taxable income. This is known as a tax loss carryforward. However, it is important to note that there are certain limitations and rules that must be followed when using tax loss carryforwards.

L Is the Sole Shareholder and an Employee of LDI