In addition to being an employee of Rock Hard Roofing Material, Lou owns 10% of the companys

Question:

In addition to being an employee of Rock Hard Roofing Material, Lou owns 10% of the company’s common stock. Rock Hard falls on hard times in 2010. To forestall bankruptcy, Rock Hard’s employees and shareholders lend the company $1,000,000. Lou’s share of the total loan is $50,000—$25,000 related to her position as an employee and $25,000 related to her ownership of stock. In early 2011, creditors force Rock Hard into bankruptcy. Lou loses her entire $50,000.
a. Is Lou’s loss related to a trade or business or an investment?
b. Can Lou deduct her loss as a bad debt expense?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Concepts In Federal Taxation

ISBN: 9780324379556

19th Edition

Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher

Question Posted: