During 2016,Wan-Ying,a lawyer,made a bona fide $5,750 loan to her friend Bill when he was in a time of need.Bill died in 2017.Wan-Ying has been informed by Bill's estate that he was insolvent.What is her deduction ton her 2017 tax return (she has no other capital transactions)?

Question

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If Wan-Ying made a bona fide loan to Bill and he was insolvent at the time of his death, she may be able to claim a bad debt deduction on her tax return. The deduction would be limited to the amount of the loan that became worthless during the year, which would be $3,000 since she made the loan in 2016 and Bill died in 2017. This would be reported on Schedule D as a short-term capital loss.

During 2016,Wan-Ying,a Lawyer,made a Bona Fide $5,750 Loan to Her