You are a senior tax associate at Martinez & Lundstrom LLP$.$ One of your clients, Taylor Shift, is a famous pop star. As an investment, she started a chain of hair salons called Taylor$$s Tops. A group of her friends invested $$800,000$ in the enterprise. Unfortunately, the salons failed, and the investors lost all their money. Because of her visibility in the entertainment business, Taylor made good on all the investor losses by reimbursing each investor$$s money.

How is this reimbursement treated for tax purposes?