1. Tom and Vicki, husband and wife, who file a joint tax return, purchase for $75,000 each one-half the stock in Guest Corporation from Al. Tom is employed full-time by Guest and earns $100,000 in annual salary. Because of Guests financial difficulties, Tom and Vicki each lend Guest an additional $25,000. The $25,000 is secured by registered bonds and must be repaid in five years, with interest accruing at the prevailing market rate. Guests financial difficulties escalate, and it declares bankruptcy. Tom and Vicki receive nothing for their Guest stock or Guest bonds.

1. What are the amount and character of each shareholders loss on the worthless stock and bonds?
2. How would your answer to Part a change if the liability were not secured by bonds?
3. How would your answer to Part a change if Tom and Vicki had purchased their stock for $75,000 each at the time Guest was formed?