Frank Loaned Emma $5,000 in 2011 with the Agreement That

question 26

Essay

Frank loaned Emma $5,000 in 2011 with the agreement that the loan would be repaid in three years.In 2012,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 2013,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 2012?
b.Assuming the loan is a business bad debt,what is the amount of and the nature of Frank's deduction in 2013?
c.Assuming instead that the loan is a nonbusiness bad debt,what is the amount of and the nature of Frank's deduction in 2012? 2013?

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Definitions:

Symbolic Tokens

Symbols or objects that represent or signify something else, often used in ceremonies or as part of rituals.

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Computer systems that emulate the decision-making ability of a human expert in specific domains.

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A political system that recognizes and accommodates diversity, allowing multiple groups or parties to coexist and influence decision-making.

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The quality of being based on or in accordance with reason or logic; often involves choosing the most efficient means to achieve a specific end.