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Each of the following is not a potential limitation on partnership losses that can be deducted on the partner's personal income tax return?

A) the partner's share of section 263(A) preproductive expenses.
B) the partner's share of entity's loss that exceeds the adjusted basis of the partner's interest in the entity at year end.
C) amounts for which the partner is not at risk from an activity carried on as a trade or business by the partnership entity.
D) for an individual partner, a loss related to rental activities

User Apetrelli
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Final answer:

Options A, B, and C are correctly recognized as limitations on the deduction of partnership losses, with Option D not being an inherent limitation but subject to other rules. The limitations include the basis limitation, at-risk rules, and Section 263(A) on preproductive expenses. LLPs offer greater personal asset protection compared to General Partnerships.

Step-by-step explanation:

The question pertains to the limitations on partnership losses that can be deducted on a partner's personal income tax return. Not all losses incurred by a partnership can be claimed by individual partners on their tax returns. Some key limitations include the basis limitation, at-risk limitation, and passive activity loss rules.

Options A, B, and C represent potential limitations on the deduction of partnership losses. Specifically, Option B refers to the basis limitation rule, which limits a partner's loss deductions to the extent of their adjusted basis in the partnership. Option C represents the at-risk limitation, meaning that loss deductions are limited to the amount for which the partner is financially at risk. However, Option D, related to a loss from rental activities for an individual partner, is not inherently a limitation but could be subject to passive activity loss rules depending on the partner's level of participation in the rental activity.

When contrasting with a General Partnership, all partners can potentially lose personal assets. However, in a Limited Liability Partnership (LLP), liability is limited to the partner's investment in the company, protecting personal assets from the company's debts.

User KesaVan
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