Core idea
A taxpayer generally needs enough basis and enough at-risk amount before a loss can be deducted, and passive activity rules can still limit the deduction after that.
TCP topic guide
Basis and loss limitations for TCP CPA candidates.
TCP tax planning questions often turn on whether a loss is currently deductible, suspended, or limited by owner-level tax rules.
Last reviewed June 5, 2026. World of Accountants is independent and not affiliated with the AICPA, NASBA, Becker, NINJA, UWorld, Gleim, or other CPA review providers.
What TCP likes to test
Watch for partner basis, S corporation stock and debt basis, debt allocations, distributions, at-risk amounts, passive activity classification, suspended losses, and release of suspended losses.
Common miss
Candidates often compute the business loss correctly but deduct it before applying the owner-level limitations.
How to practice
Use a fixed order: compute taxable loss, check basis, check at-risk amount, check passive limits, then track any suspended loss.
TCP topic guides
Keep going with related TCP topics.
Practice loop
Use the topic, then answer questions while the idea is fresh.
Short practice sets are enough to expose whether the rule is sticking.