" Let's assume this is not a passive activity for the partners.
- The tax code states this loss ($100) cannot be recognized for the year." WHERE DO YOU SEE THIS ANYWHERE IN THE CODE OR REGULATIONS? CITE THE CODE SECTION OR THE REG!
THERE IS NO SUCH RULE IN THE CODE OR REGS UNLESS A PARTNER DOES NOT MATERIALLY PARTICIPATE WHICH FOR HIM/HER WOULD MAKE IT A PASSIVE ACTIVITY!!!!!!!!!!!!!!!!!!!!!!!!!!!!
if each of the partner's materially participates and it is a non-real-estate-rental activity then the $100 loss would be allowed to each because 1) they materially participate 2) it's not a real estate rental activity so those rules do not come into play 3) they are at-risk/have basis to take the loss
read IRS PUB 925 for what constitutes material participation. if they don't materially participate it becomes a passive loss which would not be currently deductible. TT would track the suspended losses assuming each partner uses TT.
https://www.irs.gov/pub/irs-pdf/p925.pdf
The exception to material participation would be if this was an oil or gas venture. then it would have to be a working interest in an oil or gas well.
