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Business, 02.05.2021 05:00 mia1518

Monty loaned his friend Ned $12,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $9,000, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the $9,000 as a nonbusiness bad debt. Last year, before considering the tax implications of the nonbusiness bad debt, Monty had capital gains of $3,600 and taxable income of $33,250. During the current year, Ned paid Monty $8,100 in satisfaction of the debt. Determine Monty's tax treatment for the $8,100 received in the current year.

The nonbusiness bad debt of $9,000 would have been reported as a short-term capital loss , and $ would be included in Monty's gross income.

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Monty loaned his friend Ned $12,000 three years ago. Ned signed a note and made payments on the loan...

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