[Jade CPA-to-be]

I am confused, as to partners, are at risk rules the same thing as passive activity loss rule?

Anyone can explain briefly what are differences?

thanks a lot.

CPA Licensed in California- Class of 2013

[forever4]

I think at risk rule for partnership is that your share of loss in the partnership is cap at partner's basis. For example, if you have 50% division of profit and loss with a basis of 2k. Then this year, your partnership incurred a loss for 10k. Instead of recongizing the loss for 5k, you can only recog 2k because your basis is only 2k. The 3k will be carried over indefinitely.

With passive activity, an example would be rental income in which you inactively involve in. You can only deduct the passive activ loss to passive activ income.

Hope that helps :)!

FAR 5/14 88 PASSED!
REG 7/13 74 :((((((((....! I cant believe it!!!! I studied so hard...
REG retake 11/29 -> 89!!!!!!!!!!!!!!!!!!!
BEC 10/11/12 -> 84!!!!!!!!!!!!!
AUD 10/25/12 -> 95!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I'm DONE! OMG 8 months of hard work.

I SHALL PASS. BECAUSE IT'S ME, SO EVERYTHING WILL BE OK!

[Jade CPA-to-be]

@forever4,

thanks for your reply. in your example, the partner can only take 2k loss since basis limit. 3k will be carry forward until he gets positive basis in the future. so 2k loss is the partner's passive activity loss and will show on his 1040 (line 17). let us assume he also gets rental income 1k, since passive loss can only offset passive income, 2k loss offsets 1k rental income, 1k passive activity loss left and carryforward until he gets passive activity income in the future. correct?

good luck on your studying. i am taking it next monday.

CPA Licensed in California- Class of 2013

[forever4]

Jade: I think you report your partnership gain loss in form K and K-1 and E!!! But you were right about the loss. Except that you can not offset the partnership loss to the rental income! There will be two separate lines in form K-1!!!!

I'm taking it on Thursday!!! Hope we will both pass!

FAR 5/14 88 PASSED!
REG 7/13 74 :((((((((....! I cant believe it!!!! I studied so hard...
REG retake 11/29 -> 89!!!!!!!!!!!!!!!!!!!
BEC 10/11/12 -> 84!!!!!!!!!!!!!
AUD 10/25/12 -> 95!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I'm DONE! OMG 8 months of hard work.

I SHALL PASS. BECAUSE IT'S ME, SO EVERYTHING WILL BE OK!

[Author]

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