[IMGCAP(1)]When an individual receives a Schedule K-1 from a partnership reflecting a loss, there are several things to consider before deciding if the loss can be deducted. In order to determine deductibility, a partner's basis and at risk limitations need to be evaluated.

First and foremost, a partner must have adequate basis in the partnership in order to consider the deductibility of the partnership loss. A taxpayer's tax basis in a partnership interest (often called the partner's outside basis) represents the partner's cost for tax purposes and is used to measure the taxable gain or loss upon disposition of the partnership interest.

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