SIE Exam Question 368: Answer and Explanation

Question: 368

Passive losses generated by a limited partnership may be used to reduce which of the following?

• A. Capital gains from the sale of appreciated investments only
• B. Both ordinary income and passive income
• C. Ordinary income only
• D. Passive income only

Correct Answer: D

Explanation:

D - Passive losses may be used to offset earnings from other passive sources only. They cannot be used to offset investment income or ordinary income.