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:

Contractual Obligations

Contractual obligations are the duties that parties are legally bound to perform or avoid under the terms of a contract.

Debris

Scattered pieces of waste or remains left after the destruction of something.

Delegated Duty

A task or responsibility assigned by one party to another, usually within the scope of employment or contractual agreement.

Assignment

The act of passing on rights, property, or duties from one individual or group to another.