Frank Loaned Emma $5,000 in 2012 with the Agreement That

question 5

Essay

Frank loaned Emma $5,000 in 2012 with the agreement that the loan would be repaid in three years.In 2013,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 2014,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 2013?
b.Assuming the loan is a business bad debt,what is the amount of and the nature of Frank's deduction in 2014?
c.Assuming instead that the loan is a nonbusiness bad debt,what is the amount of and the nature of Frank's deduction in 2013 and 2014?

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Definitions:

Problem Drinkers

Individuals who consume alcohol in a manner that leads to health or social issues but might not meet the criteria for alcohol dependence.

Relapses

Returning to a previous state of health deterioration after a period of improvement, often used in the context of chronic illness or substance abuse recovery.

Disulfiram

A drug that causes an aversive reaction when taken with alcohol; used to treat alcoholism; also known as Antabuse.

Alcohol Abuse

The excessive or problematic drinking of alcohol that leads to harm or distress, which can negatively impact social, occupational, or health aspects of life.