How will the loss be treated on the return

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Problem

A taxpayer loaned$2000 to her best friend in 2011. The friend filed for bankruptcy in 2013 atwhich time the taxpayer was told to expect to receive $.60 on thedollar on this personal loan. On February 2, 2014 the taxpayer received finalsettlement of $950.00. How much can the taxpayer deduct in 2013 and 2014, and how will the loss be treated on the return?

A) 2013:$800 short term capital loss; 2014 $250 short term capital loss

B) 2013:$0; 2014 $1,050 short term capital loss

C) 2013:$800 long term capital loss; $250.00 long term capital loss

D) 2013:$0; 2014 $1,050 long-term capital Loss

E) Noneof the above.

Reference no: EM131788603

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