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:

T-bill Rate

The yield or interest rate on Treasury bills, which are short-term debt securities issued by the U.S. government.

Futures Contract

A standardized legal agreement to buy or sell a particular commodity or financial asset at a predetermined price at a specified time in the future.

Spot Price

The present market cost at which an asset can be purchased or sold for instant delivery.

Contract Maturity

The specified date on which the contract expires and the financial transaction must be settled or completed.