During 2012,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 2013.Wan-Ying has been informed by Bill's estate that he was insolvent.What is her deduction ton her 2013 tax return (she has no other capital transactions)?

Question

Quizplus · Accepted Answer

Since Bill was insolvent at the time of his death, Wan-Ying can claim a bad debt deduction of up to $3,000 on her 2013 tax return. This is the maximum amount allowed for non-business bad debts. She cannot claim the full $5,750 because the loan was not a capital transaction.

During 2012,Wan-Ying,a Lawyer,made a Bona Fide $5,750 Loan to Her