Problem 3-18 Bad Debts (LO 3.10) Steinar loaned a friend $9,500 to buy some stock 3 years ago. In the current year the debt became worthless a. How much is Steinar's deduction for the bad debt for this year? (Assume he has no other capital gains or losses.) as a nonbusiness bad debt. Feedback Check My Wors Bad debts fall into one of two categories, business bad debts or nonbusiness bad debts. Debts that arise from the taxpayer's trade or business are classified as business bad debts, while all other debts are considered nonbusiness bad debts. The distinction between the two types of debts is important, since business bad debts are ordinary deductions and nonbusiness bad debts are short-term capital losses b. What can Steinar do with the deduction not used this year? The remaining $ can be carried forward as a short term loss and deducted in future years, subject to an annual limitation