Frank Loaned Emma $5,000 in 2015 with the Agreement That

question 90

Essay

Frank loaned Emma $5,000 in 2015 with the agreement that the loan would be repaid in three years.In 2016,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 2017,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 2016?
b.Assuming the loan is a business bad debt,what is the amount of and the nature of Frank's deduction in 2017?
c.Assuming instead that the loan is a nonbusiness bad debt,what is the amount of and the nature of Frank's deduction in 2016 and 2017?

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Definitions:

Smoke

The visible vapor and gases emitted when a substance burns, often carrying particulates and harmful chemical compounds.

Awake

The state of being conscious and alert, often as opposed to being asleep.

Conquer

To overcome or take control by force, often used in the context of battles or competitions.

Obtain

To acquire or gain possession of something through effort, purchase, or request.