He personally loaned $150,000 to his wife on a demand promissory note without interest, in order to help her purchase some land adjacent to her retailing business which she operated as a sole proprietorship. The land was used as a parking lot for the customers and employees of the business and was responsible for increasing the income of the business by about 5%. However, early in 2021, the land was expropriated by the city for $200,000 and it was not replaced. The note was repaid from the proceeds of the sale of the land.

Required: Discuss all of the possible income tax implications of these transactions through to the ultimate disposition by the recipient of the property involved.