Question

George (an 80

1) The loans provide a nonbusiness bad debt deduction to George in the current year.
2) George may claim an ordinary loss as to the worthless loans.
3) George is not permitted a deduction for the worthless loans.
4) The loans provide George with a business bad debt deduction.
5) None of these choices are correct.

Answer 1

The correct answer is Choice 2) George may claim an ordinary loss as to the worthless loans.

Step-by-step explanation:

The correct answer is Choice 2) George may claim an ordinary loss as to the worthless loans.

A nonbusiness bad debt deduction can only be claimed by an individual for debts that are completely worthless. In this case, George can claim an ordinary loss for the worthless loans.

Choice 1 is incorrect because George can claim a nonbusiness bad debt deduction, not a business bad debt deduction. Choice 3 is incorrect because George is permitted a deduction for the worthless loans. Choice 4 is incorrect because the loans are nonbusiness bad debts.

Reference: Chapter 17