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:

Organized Labor

Groups of workers, such as unions, who collectively negotiate wages, working conditions, and other employment terms with their employers.

Intrinsic Rewards

The personal satisfaction and fulfillment derived from accomplishing a task or learning new skills, independent of external rewards.

Cash Bonus

A financial reward given to employees or individuals, typically as a lump sum, as a recognition of their contributions or achievements.

Flextime Program

A flexible working hours scheme that allows employees to alter their start and finish times, within certain limits, to suit their personal commitments and needs.