Problem: Module $7$ Textbook Problem $8$

Learning Objective: $7-6$ Adjust the tax basis in a partnership interest

On January $1,$ Year $1,$ Radish, an individual, paid $$15,000$ for $5$ percent of the stock in Root Corp., an S corporation. In November Year $1,$

he loaned $$8,000$ to Root Corp. in return for a promissory note. Root Corp. generated a $$600,000$ operating loss in Year $1.$ Root

Corp. generated $$220,000$ ordinary business income in Year $2.$ In Year $3,$ Root Corp. repaid its $$8,000$ debt to Radish before he

restored any basis in the debt.

Required:

How much gain or loss, if any, will Radish recognize as a result of the debt repayment in Year $3?$

Answer is complete but not entirely correct.