Two years ago Sharon loaned her friend Bill 10000 In the cur

Two years ago, Sharon loaned her friend Bill $10,000. In the current year, Bill paid Sharon $1,000 in final settlement of the debt. Sharon has $50,000 of salary and $6,000 of capital gains for the current year. What amount of the loss may she use for the current year?

a. $9,000.

b. $0.

c. $10,000.

d. $3,000.

e. $7,000.

Solution

Capital gain for the current year = 6000

Loss on the account of loan to friend =

Loan given - Final settlement of loan

10000-1000 = 9000

Amount of loss in current year = Loss on loan - Capital gain for the current year

= 9000 - 6000 = 3000

Answer is d. $3,000.