Frank Loaned Emma $5,000 in 2016 with the Agreement That

question 1430

Essay

Frank loaned Emma $5,000 in 2016 with the agreement that the loan would be repaid in three years. In 2017, Emma filed for bankruptcy and, based on available information from the bankruptcy court, it was estimated that Frank could expect to receive $.65 on the dollar. In 2018, final settlement was made and Frank received $600
a. Assuming the loan is a business bad debt, what is the amount of and the nature of Frank's deduction in 2017
b. Assuming the loan is a business bad debt, what is the amount of and the nature of Frank's deduction in 2018
c. Assuming instead that the loan is a nonbusiness bad debt, what is the amount of and the nature of Frank's de in 2017 and 2018?

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Definitions:

Dirty Tricks

Unethical, deceptive, or unfair strategies employed to gain an advantage in a competition or negotiation.

Responding

The act of replying or reacting to something that has been said or done.

Social Contract Ethics

A theory in philosophy that posits moral and political rules are based on a contract or agreement among people to form the society in which they live.

Traditional Competitive Bargaining

A negotiation approach that primarily focuses on winning or gaining advantage over the opposing party.