Monty loaned his friend Ned $14,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $12,600, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the $12,600 as a nonbusiness bad debt. Last year, before considering the tax implications of the nonbusiness bad debt, Monty had capital gains of $5,040 and taxable income of $49,000. During the current year, Ned paid Monty $11,340 in satisfaction of the debt.

Determine Monty's tax treatment for the $11,340 received in the current year.

The nonbusiness bad debt of $12,600 would have been reported as a short-term capital loss , and $___________ would be included in Monty's gross income.

**Explain and show work**