Koa received a $300,000 bequest from his grandfather, who died in 2018.  With $200,000 of the money, which he used as a down payment, he purchased a used tanning salon on January 1, 2019.  In addition to the down payment, Koa assumed an existing recourse mortgage on the property in the amount of $800,000.  The purchase included the building and all the equipment, and Koa deducted $100,000 as depreciation for 2019.  The business has boomed since Koa took over the salon, and its value increased.  So, in January 2020, he refinanced with a new recourse mortgage of $1 million and paid off the old one, pocketing the extra cash of $225,000.  However, the good times in the tanning business came to an end in March 2020 when customers stayed home instead of coming in to refresh their suntans.  By July 2020, Koa had missed his 4th mortgage payment and the lender started threatening to foreclose.

What are the tax consequences to Koa of spending the $225,000 from January 2020 refinancing on non-business entertainment for him and his friends?

B. Assuming that Koa and his lender strike a deal in January 2021 to restructure the debt (the balance of which is $975,000) by Koa issuing a new recourse mortgage in the amount of $725,000, explain the tax consequences to Koa.