In 2014 Grace Loaned Her Friend Paula $12,000 to Invest

question 9

Multiple Choice

In 2014 Grace loaned her friend Paula $12,000 to invest in various stocks.Paula signed a note to repay the principal with interest.Unfortunately the market for that industry sector plunged,and Paula incurred large losses.In 2015 Paula declared personal bankruptcy and Grace was unable to collect any of her loan.Grace had no other gains or losses last year or this year.The result is

• A)Grace deducts a business bad debt of $12,000 in 2015.
• B)Grace deducts a $12,000 nonbusiness bad debt as a short-term capital loss in 2015.
• C)Grace deducts a $3,000 nonbusiness bad debt as a short-term capital loss in 2015 and carries $9,000 over to subsequent years.
• D)Grace deducts a business bad debt of $3,000 in 2015 and carries $9,000 over to subsequent years.

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Definitions:

Flight Muscles

The muscles that power the wings in flying animals, enabling flight.

Constant Body Temperature

The maintenance of a steady internal body temperature regardless of external environmental changes.

Birds

Warm-blooded vertebrates with feathers, wings, a beak, and typically the ability to fly, laying hard-shelled eggs.