Which of the following is the correct order in which loss limitation rules are applied? A) basis rules 1^st, at-risk rules 2^nd, passive loss rules 3^rd. B) passive loss rules 1^st, at-risk rules 2^nd, basis rules 3^rd. C) basis rules 1^st, passive loss rules 2^nd, at-risk rules 3^rd. D)passive loss rules 1^st, basis rules 2^nd, at-risk rules 3^rd. E)None of these

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Basis rules are applied first to determine the amount of loss that can be deducted. At-risk rules are then applied to limit the amount of loss that can be deducted to the amount that the taxpayer has at risk in the activity. Passive loss rules are then applied to further limit the amount of loss that can be deducted to the amount of passive income that the taxpayer has.

Which of the Following Is the Correct Order in Which