Question
In 2017, Gillian personally loaned Matt $25,000. In 2018, Matt defaulted on the loan when the remaining balance outstanding was $15,000. Since Matts whereabouts were
In 2017, Gillian personally loaned Matt $25,000. In 2018, Matt defaulted on the loan when the remaining balance outstanding was $15,000. Since Matts whereabouts were unknown, there was no reasonable prospect of Gillian recovering the $15,000. Gillian claimed the $15,000 as a nonbusiness bad debt in 2018. Her AGI in 2018 was $50,000 which also included a short-term capital gain of $14,000. In 2019, Matt paid Gillian $5,000 in final settlement of the loan. In 2019, Gillian should:
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Amend her 2018 tax return only claiming a $10,000 nonbusiness bad debt
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b. | Amend her 2018 tax return since the nonbusiness bad debt is not deductible until 2019
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c. | Report no income or deduction from the nonbusiness bad debt in 2019
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d. | Report $1,000 of income for 2019
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e. | Report $5,000 of income for 2019
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