The IRS has announced a new Large Business and International Division Active Campaign on partnership losses in excess of partner’s basis.[1]

The limited summary on the IRS webpage states:

Partners that report flow-through losses from partnerships must have adequate outside basis as determined pursuant to IRC § 705 to deduct the losses or else the losses are suspended per § 704(d) to the extent they exceed the partner’s basis in the partnership interest.[2]

Tax Notes Today Federal described the program in an article discussing the release as follows:

The campaign focuses on section 704(d), which states that a partner’s distributive share of partnership loss will be allowed only to the extent of the partner’s adjusted basis in his partnership interest — that is, his outside basis — at the end of the partnership year in which the loss occurred.

The campaign notes that if the partner’s share of losses exceeds his outside basis, the excess amount is suspended and may be carried over for use in another tax year in which the partner has outside basis available.[3]

[1] Partnership Losses in Excess of Partner's Basis Campaign, Large Business and International Active Campaigns, IRS webpage, February 8, 2022 update, https://www.irs.gov/businesses/corporations/lbi-active-campaigns (retrieved February 12, 2022)

[2] Partnership Losses in Excess of Partner's Basis Campaign, Large Business and International Active Campaigns, IRS webpage, February 8, 2022 update

[3] Kristen A. Parillo, “New LB&I Campaign Focuses on Partnership Loss Limitation Rules,” Tax Notes Today Federal, February 9, 2022, https://www.taxnotes.com/tax-notes-today-federal/basis/new-lbi-campaign-focuses-partnership-loss-limitation-rules/2022/02/09/7d5p3 (subscription required, retrieved February 12, 2022)