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

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The correct order is first the basis limitation, then the at-risk limitations, and finally the passive loss limitations. If all three hurdles are met, a partner may deduct the loss.

If a Partnership Allocates Losses to the Partners, the Partners