Which of the following is the correct order in which loss limitation rules are applied?
A)Basis rules first, at-risk rules second, passive loss rules third
B)Passive loss rules first, at-risk rules second, basis rules third
C)Basis rules first, passive loss rules second, at-risk rules third
D)Passive loss rules first, basis rules second, at-risk rules third
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

The correct order in which loss limitation rules are applied is: basis rules first, at-risk rules second, and passive loss rules third. This sequence ensures that a taxpayer first has sufficient investment in the activity (basis), is economically at risk for the investment (at-risk rules), and is materially participating in the activity (passive loss rules) before claiming a loss.

Which of the Following Is the Correct Order in Which