Monty loaned his friend Ned $19,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $14,250, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the $14,250 as a nonbusiness bad debt. Last year before considering the tax implications of the nonbusiness bad debt, Monty had capital gains of $5,700 and taxable income of $33,250. During the current year, Ned paid Monty $12,825 in satisfaction of the debt.

Determine Monty's tax treatment for the $12,825 received in the current year.

The nonbusiness bad debt of $14,250 would have been reported as a short-term capital loss , and ($____) would be included in Monty's gross income.