Rita loaned her brother, Richard, $7,500 on February 14, 2018. e loan represents a bona de loan. Richard led for bankruptcy in 2022, and Rita

Rita loaned her brother, Richard, $7,500 on February 14, 2018. e loan represents a bona fide loan. Richard filed for bankruptcy in 2022, and Rita learned that she could expect to receive only $.70 on the dollar on the personal loan that she had made to him. On May 17, 2023, Rita received a final settlement of $4,000.

a. How much loss can Rita deduct in 2022?

b. How much loss can Rita deduct in 2023?

c. How will this loss be treated on Rita’s tax return?