Last Year,Abby Loaned Pat $10,000 as a Gesture of Their

question 104

Multiple Choice

Last year,Abby loaned Pat $10,000 as a gesture of their friendship.Although Pat had signed a note payable that contained interest payments and a maturity date,the loan had not been repaid this year when Pat died insolvent.For this year,assuming that the loan was bona fide,Abby should account for nonpayment of the loan as a(n)

• A)itemized deduction.
• B)ordinary loss.
• C)long-term capital loss.
• D)short-term capital loss.

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Definitions:

Lease Payments

Periodic payments made by a lessee to a lessor for the use of an asset over a specified time period.

CCA Class

A category used in Canadian tax law that determines the depreciation rate for tax purposes on tangible capital assets.

Incremental Cash Flow

The additional cash flow a company generates from undertaking a new project, highlighting the project's potential profitability.

Lease Payments

Regular payments made by a lessee to a lessor for the use of an asset over a specified period as per a lease agreement.