Alto Finance Inc carries on a highly profitable business as an investment dealer.Alto is considering buying an interest in a partnership that had been carrying on a diamond mining business without success.The mine is now closed and has no current operations.Alto is interested in becoming a 50 percent partner because the partnership has losses of $5 million and it would like to deduct a half of those losses against its other income.Alto can deduct the losses if it acquires a 50 percent interest in the partnership.

Question

Quizplus · Accepted Answer

In most jurisdictions, tax laws prevent or limit the ability of a new partner to use pre-existing losses of a partnership to offset their other taxable income, especially if the losses occurred before the partner joined the partnership.

Alto Finance Inc Carries on a Highly Profitable Business as an Investment