Byron Loaned $5,000 to His Friend Alan in 2011

Byron loaned $5,000 to his friend Alan in 2011. They drew up a formal loan agreement that called for a reasonable rate of interest. Alan used the loan proceeds to pay expenses during his last year in college. Byron was recently informed that his friend Alan was struck by lightning and died. Byron will never be able to collect the proceeds of this loan because Alan died with no assets. What tax benefit, if any, will Byron will be able to claim in 2018, the year that the loan became worthless.

A) $5,000 tax credit.
B) $5,000 ordinary loss.
C) $5,000 short-term capital loss.
D) This is a personal non-deductible loss.