From 11:00PM PDT on Friday, July 1 until 5:00AM PDT on Saturday, July 2, the Shmoop engineering elves will be making tweaks and improvements to the site. That means Shmoop will be unavailable for use during that time. Thanks for your patience!
We have changed our privacy policy. In addition, we use cookies on our website for various purposes. By continuing on our website, you consent to our use of cookies. You can learn about our practices by reading our privacy policy.
© 2016 Shmoop University, Inc. All rights reserved.

Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Passive Loss

Definition:

In limited partnerships, limited partners can't take part in managing their own investments.

These investments generate huge accounting losses at the beginning, which pass through the partnership entity to the limited partners. (Those are the passive losses.) It could be beneficial to those partners who might have a lot of income from other sources and would love to offset that income with these investment losses, but the IRS has put a stop to that. Passive losses can only be used to offset passive income, the income that you get from those limited partnership investments.