In 2019, Wang Invests $80,000 for a 20% Interest in a Partnership

question 20

Multiple Choice

In 2019, 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 2020 and there are no other transactions that affect his at-risk amount, he can use all of the $20,000 loss carried over from 2019.
• D)Wang's $100,000 loss is nondeductible in 2019 and 2020 under the passive activity loss provisions.
• E)All of the statements are correct.

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Definitions:

Want

An unfulfilled desire or need that individuals or societies aim to satisfy through the acquisition of goods or services.

Marginal Analysis

The comparison of marginal (“extra” or “additional”) benefits and marginal costs, usually for decision making.

Marginal Benefits

The uplift in utility or enjoyment gained through consuming or producing an added unit of a good or service.

Marginal Costs

The added cost incurred when one more unit of a good or service is produced.