At the beginning of the current year, Sandy Brewer had a zero basis in her 38 shares
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Question:
At the beginning of the current year, Sandy Brewer had a zero basis in her 38 shares of stock in Lindlee, an S corporation, a zero basis in a $5,000 note from Lindlee, and a $7,400 carryforward of aprior yearordinary loss from Lindlee that she was unable to deduct be-cause of the basis limitation. Early in February of the current year, Sandy was notified by Lindlee's attorney that the corporation was bankrupt. Consequently, Lindlee was defaulting on its $5,000 debt to Sandy, and Sandy's 38 shares of stock were worthless. Describe the consequences to Sandy of the worthlessness of her Lindlee investments (note, stock and loss carryforward).
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