JVL Tax Law

Business and Transactional Tax Practice

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Call: 650.999.0573

Partnership Losses

Partners in partnerships are subject to numerous limitations on claiming losses allocated to them by a partnership.  Among the most important are the “passive activity losses” and the “at-risk limitation” rules.

The passive activity loss rules limit the ability of partners to use partnership losses to offset other income, unless the partner is actively involved in the partnership business.  The at-risk limitation generally limits the amount of a loss a partner can claim to the amount invested by the partner.

Partners who do not expect to receive any return from their partnership interest may be able to claim an ordinary loss by abandoning their partnership interest.  An ordinary loss is potentially available even when the abandoned partnership interest has some value.  If the partnership interest has no value, it may also be possible to claim an ordinary loss on the basis of worthlessness.

Abandoning a partnership interest may be beneficial for taxpayers if the partnership expects to have debt forgiven.  The cancellation of the partnership debt may result in cancellation of debt income being allocated to the partners.

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Services and Practice Areas

  • M&A
    • Entity Selection
    • Equity Compensation Plan
    • Earn-outs
    • Structuring
    • Bankruptcy and Debt Workouts
    • Joint Ventures
  • International
    • Inbound Investment For Foreign Investors
    • Outbound: PFICs and CFCs
    • Individuals Moving to and From the United States
    • Tax Compliance
  • Tax Losses
    • Bad Business Debt
    • Theft Losses, Casualty Losses
    • Restitution and Returns of Compensation
    • Partnership Losses
  • Services
    • Tax Services for Private Companies
    • Tax Services for Individuals
    • Financial Advisors, Attorneys and Accountants
    • Implementation
    • Tax Diagnosis
    • Outline of Areas of Experience
    • IRS and California State Tax Audits

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Directions and Contact Info

JVL Tax Law

535 Middlefield Rd, Suite 140

Menlo Park, CA 94025

650-999-0573

 

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  • Home
  • About
  • Services
    • Tax Diagnosis
    • Outline of Areas of Experience
    • Tax Services for Private Companies
    • Tax Services for Individuals
    • Financial Advisors, Attorneys and Accountants
    • Implementation
    • IRS and California State Tax Audits
  • M&A
    • Entity Selection
    • Equity Compensation Plan
    • Earn-outs
    • Structuring
    • Bankruptcy and Debt Workouts
    • Joint Ventures
  • Industry
    Experience
    • Financial Services: Private Equity, Hedge Funds, Cryptocurrency
    • Software and Tech
    • Lawyers and Law Firms
  • International
    • Inbound Investment For Foreign Investors
    • Outbound: PFICs and CFCs
    • Individuals Moving to and From the United States
    • Tax Compliance
  • Tax
    Losses
    • Bad Business Debt
    • Theft Losses, Casualty Losses
    • Restitution and Returns of Compensation
    • Partnership Losses
  • News
  • Contact