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

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This statement is true. When a partnership allocates losses to its partners, the partners must first apply the basis limitation, then the at-risk limitations, and finally the passive loss limitations. Only if all three limitations are met can the partner deduct the loss.

If a Partnership Allocates Losses to the Partners,the Partners Must