Monty loaned his friend Ned $23,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $16,100, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the $16,100 as a nonbusiness bad debt. Last year, before considering the tax implications of the nonbusiness bad debt, Monty had capital gains of $6,440 and taxable income of $31,500. During the current year, Ned paid Monty $14,490 in satisfaction of the debt. Determine Monty's tax treatment for the $14,490 received in the current year. The nonbusiness bad debt of $16,100 would have been reported as a short-term capital loss , and $ would be included in Monty's gross income this year.
Monty loaned his friend Ned $23,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $16,100, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the $16,100 as a nonbusiness bad debt. Last year, before considering the tax implications of the nonbusiness bad debt, Monty had capital gains of $6,440 and taxable income of $31,500. During the current year, Ned paid Monty $14,490 in satisfaction of the debt. Determine Monty's tax treatment for the $14,490 received in the current year. The nonbusiness bad debt of $16,100 would have been reported as a short-term capital loss , and $ would be included in Monty's gross income this year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Monty loaned his friend Ned $23,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining
balance was $16,100, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated
the $16,100 as a nonbusiness bad debt. Last year, before considering the tax implications of the nonbusiness bad debt, Monty had capital
gains of $6,440 and taxable income of $31,500. During the current year, Ned paid Monty $14,490 in satisfaction of the debt.
Determine Monty's tax treatment for the $14,490 received in the current year.
The nonbusiness bad debt of $16,100 would have been reported as a short-term capital loss
and $
would be
included in Monty's gross income this year.
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