Fact Pattern 14-A1 (Questions A2-A3 Apply)

question 15

Multiple Choice

Fact Pattern 14-A1 (Questions A2-A3 apply)
Linea,an employee of Hard Labor Industries (HLI) ,is injured in a work-related accident.Based on the diagnosis of Newt,a doctor,Linea accepts $50,000 from HLI and waives the right to future claims.Newt's diagnosis later proves to have been wrong.
-Refer to Fact Pattern 14-A1.Most likely,Linea may

• A)obtain damages from HLI.
• B)obtain damages from Newt.
• C)recover nothing.
• D)set aside the settlement with HLI.

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Definitions:

Trade or Business

Activity conducted for the purpose of earning income or profit, involving regular and continuous activities in a particular field.

Deemed Worthless

A term referring to assets that have become valueless and are recognized as a loss for tax purposes.

Long-Term Loss

A loss realized from the sale of an asset held for more than one year, which can offset long-term capital gains.

Short-Term Loss

A financial loss realized on the sale of an asset held for one year or less, used to offset capital gains and reduce taxable income.