Series 7 practice questionmediumAlternative Investments — DPPs
Passive income from a limited partnership can be offset by:
- AEarned income from employment
- BPortfolio income from dividends and interest
- CPassive losses from another limited partnership✓ Correct answer
- DCapital gains from stock sales
Explanation
Why C — Passive losses from another limited partnership
Under the passive activity rules (IRC Section 469), passive income can only be offset by passive losses, and passive losses can only offset passive income. Limited partnership income and losses are considered passive by definition. Passive losses cannot be used to offset active income (wages) or portfolio income (interest, dividends, capital gains).
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