Four years$$ ago, Susan loaned$$ $$7,000$ to her friend Joe. During the current$$ year, the$$ $$7,000$ loan is considered worthless. Explain how Susan should treat the worthless debt for tax purposes.

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Part $1$

A$.$

The debt is a nonbusiness bad$$ debt; therefore, it is nondeductible.

B$.$

The debt is a nonbusiness bad$$ debt; therefore, the loss is treated as a ordinary loss.

C$.$

The debt is a nonbusiness bad$$ debt; therefore, the loss is treated as a$$ long$-$term capital loss.

D$.$

The debt is a nonbusiness bad$$ debt; therefore, the loss is treated as a$$ short$-$term capital loss.