Question

Problem 14-45 (LO. 2, 3, 5) Melaney has had a bad year with her investments. She lent a friend $8,000; the friend did not repay the loan when it was due and then declared bankruptcy. The loan is totally uncollectible. Melaney also was notified by her broker that the Oak corporate bonds she owned became worthless on December 31, 2019. She had purchased the bonds for $22,000 on November 10, 2018. Melaney also had a $60,000 loss on the disposition of § 1244 corporate stock that she purchased several years ago. Melaney is single. a. What are the nature and amount of Melaney's losses? Type of Gain or Loss Amount Before Any Limitations Property Uncollectible loan to friend Worthless Oak corporate bonds Loss on § 1244 corporate stock b. What is Melaney's AGI for 2019 assuming that she has $65,000 of ordinary gross income from sources other than those discussed? c. What are the nature and amount of Melaney's loss carryforwards? in short-term capital loss carryforward and $ in long-term capital loss She has $ carryforward.

Answer 1

ANSWER

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a: Determine the nature and amount of the losses, in the following manner: Amount Nature of gain or before any Description loss limitation Short-term capital loss Worthless corporate Long-term capital loss Uncollectible loan $8,000 Non-business debt $22,000 Long-term capital loss bonds Ordinary loss of $50,000 Part ordinary loss and part capital loss allowed fully for Single tax $60,000 filers. Remaining $i0,000 is a Loss on §1244 Corporate stock long-term capital loss b: Determine the AGI for 2019 assuming $65,000 of ordinary gross income from sources other than those discussed, in the following manner: AGI Ordinary gross income -[Ordinary loss+Capital loss allowed per year] $65,000-[$50,000 $3, 000 =$12, 000 Note: Capital loss upto $3,000 can be offset against the ordinary income per year. Any losses beyond $3,000 are carried forward to the future years. c: Determine the nature and amount of the loss carryforwards, in the following manner: Capital loss upto $3,000 can be offset against the ordinary income per year. Any losses beyond $3,000 are carried forward to the future years. Therefore, short-term capital loss a long-term capital oss for $32,000 S8, 000-$3,000] $22, 000 $10,000 are carried forward to the future years. for $5,000 and

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