Three years ago, Sharon loaned her sister $30,000 to buy a car. A note was issued for the loan with the provision for monthly payments of principal and interest. Last year, Sharon purchased a car from the same dealer, Hank's Auto. As partial payment for the car, the dealer accepted the note from Sharon's sister. At the time Sharon purchased the car, the note had a balance of $18,000. During the current year, Sharon's sister died. Hank's Auto was notified that no further payments on the note would be received. At the time of the notification, the note had a balance due of $15,500. What is the amount of loss, with respect to the note, that Hank's Auto may claim on the current year tax return?

Question

Quizplus · Accepted Answer

The note had a balance of $18,000 when Hank's Auto accepted it as partial payment for the car. The note had a balance of $15,500 when Sharon's sister died. The loss to Hank's Auto is the difference between these two amounts, which is $2,500.

Three Years Ago, Sharon Loaned Her Sister $30,000 to Buy