In 2018, Wang Invests $80,000 for a 20% Interest in a Partnership

question 39

Multiple Choice

In 2018, Wang invests $80,000 for a 20% interest in a partnership in which he is a material participant. The partnership incurs a loss with $100,000 being Wang's share. Which of the following statements is incorrect?

• A) Since Wang has only $80,000 of capital at risk, he cannot deduct any more than this amount against his other income.
• B) Wang's nondeductible loss of $20,000 can be carried over and used in future years (subject to the at-risk provisions).
• C) If Wang has taxable income of $40,000 from the partnership in 2019 and there are no other transactions that affect his at-risk amount, he can use all of the $20,000 loss carried over from 2018.
• D) Wang's $100,000 loss is nondeductible in 2018 and 2019 under the passive activity loss provisions.
• E) All of the statements are correct.

---

Definitions:

Degrees of Freedom

The number of independent values or quantities that can vary in the analysis of statistical parameters.

Randomized Block Experiment

An experimental design that groups participants into blocks based on certain characteristics before randomly assigning them to treatments, improving the experiment's accuracy by reducing variance.

Ordinal

Pertains to a categorical ranking where the order among values is significant but not the distance between them.

Interval

A range between two numbers or points, often used to specify the precision of an estimate or the coverage of a dataset.