In 2016,Grace Loaned Her Friend Paula $12,000 to Invest in Various

question 109

Multiple Choice

In 2016,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 2017,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 2017.
• B)Grace deducts a $12,000 nonbusiness bad debt as a short-term capital loss in 2017.
• C)Grace deducts a $3,000 nonbusiness bad debt as a short-term capital loss in 2017 and carries $9,000 over to subsequent years.
• D)Grace deducts a business bad debt of $3,000 in 2017 and carries $9,000 over to subsequent years.

---

Definitions:

Fast-Second Strategy

A business approach where companies quickly follow pioneers in a market, improving on their innovations or reducing costs to gain competitive advantage.

Economic Efficiency

The optimal distribution of resources to meet the needs and wants of a society, minimizing waste and maximizing value.

Productive Efficiency

A situation in which a firm or economy produces goods at the lowest possible cost, utilizing all available resources efficiently.

Allocative Efficiency

A state of the market where resources are allocated in a way that maximizes total consumer and producer surplus.