What is the correct order of the loss limitation rules?

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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:

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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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