Problem 7-29 (Algorithmic) (LO. 1) Monty loaned his friend Ned $24,000 three years ago. Ned...
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Problem 7-29 (Algorithmic) (LO. 1) Monty loaned his friend Ned $24,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $21,600, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the $21,600 as a nonbusiness bad debt. Last year, before considering the tax implications of the nonbusiness bad debt, Monty had capital gains of $8,640 and taxable income of $49,000. During the current year, Ned paid Monty $19,440 in satisfaction of the debt. Determine Monty's tax treatment for the $19,440 received in the current year. The nonbusiness bad debt of $21,600 would have been reported as a short-term capital loss, and $ would be included in Monty's gross income this year. Feedback Check My Work A nonbusiness bad debt is a debt unrelated to the taxpayer's trade or business either when it was created or when it became worthless
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