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Question

What losses and deductions are included in the basis limitation of the partner's share of partnership losses?

Answer

Regulation 1.704-1(d)(2) specifies the loss and deduction items of sections 702(a)(1), 702(a)(2), 702(a)(3), 702(a)(7), and 702(a)(8) are included in the losses of the partnership. The following is a list of those losses.

• 702(a)(1) short-term capital losses.
• 702(a)(2) long-term capital losses.
• 702(a)(3) section 1231 losses.
• 702(a)(7) items of loss or deduction required to be reported separately on Schedule K-1.
• 702(a)(8) taxable loss not required to be reported separately.

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