During the year, Mr.Y joined together in a partnership with Ms.Z to form Pizza and Videos to Go.Mr.Y provided only the financial backing, while Ms.Z managed the operation.During the first year of operations, the partnership generated a loss.Mr.Y and Ms.Z may use their respective shares of the loss (in their entirety) to reduce their investment income.

Question

Quizplus · Accepted Answer

Partnership losses can generally be used to offset other income on the partners' tax returns, but there are limitations. The ability to use these losses depends on the basis in the partnership, at-risk limitations, and passive activity loss rules. Simply having investment income does not automatically allow for the offset by partnership losses, especially if the losses are considered passive and the investment income is not.

During the Year, Mr