Which of the following statements regarding the basis limitation on deduction of partnership losses is false?
A) If a partner's share of partnership losses exceeds the partner's tax basis in the partnership interest, the excess is not deductible in the current year.
B) Partnership losses that are not deductible due to the basis limitation can be carried forward indefinitely.
C) Partners can increase tax basis in their partnership interest only by making additional capital contributions.
D) If a partnership becomes profitable in the future, the partner's share of such future income will create basis against which loss carryforwards can be deducted.

Question

Quizplus · Accepted Answer

Partners can increase their tax basis in their partnership interest through additional capital contributions, their share of the partnership's income, and their share of the partnership's liabilities. Therefore, statement C is false because it suggests that the only way to increase basis is through additional capital contributions, omitting other methods like income allocation and share of liabilities.

Which of the Following Statements Regarding the Basis Limitation on Deduction