Two Years Ago, Gina Loaned Tom $50,000

question 36

Multiple Choice

Two years ago, Gina loaned Tom $50,000. Tom signed a note the terms of which called for monthly payments of $2,000 plus 6% interest on the outstanding balance. Last year, when the balance owing on the loan was $18,000, Tom defaulted on the note. As of the end of last year, there appeared to be no reasonable prospect of Gina recovering the $18,000. As a consequence, Gina claimed the $18,000 as a nonbusiness bad debt. Last year, Gina had AGI of a negative $6,000 which included $5,000 net long-term capital gains and $4,000 of qualified dividends. Gina did not itemize her deductions. During the current year, Tom paid Gina $13,000 in final settlement of the loan. How should Gina account for the payment in the current year?

• A)File an amended tax return for last year.
• B)Report no income for the current year.
• C)Report $8,000 of income for the current year.
• D)Report $12,000 of income for the current year.
• E)None of the above.

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Definitions:

Self-insight

The understanding and awareness an individual has of their own personality traits, behaviors, and feelings.

Psychodynamic Therapy

A type of depth psychology aimed at uncovering the unconscious aspects of a client's mind to reduce psychic tension.

Group Therapy

Therapy conducted with groups rather than individuals, providing benefits from group interaction.

Individual Therapy

A form of psychotherapy where one-on-one sessions between a therapist and a client focus on the client's issues and ways to resolve them.