What is the correct order of the loss limitation rules?

Which of the following is the correct order in which loss limitation rules are applied?

  • Basis rules first, at-risk rules second, passive loss rules third.
  • Passive loss rules first, at-risk rules second, basis rules third.
  • Basis rules first, passive loss rules second, at-risk rules third.
  • Passive loss rules first, basis rules second, at-risk rules third.

Answer

Solution: Basis rules first, at-risk rules second, passive loss rules third. Explanation: The loss limitation rules are applied in the below given order: 1) Section 704(d) basis limitation rule 2) Section 465 at-risk limitation rule

3) Section 469 passive loss limitation rule

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