During 2022, your client, Kendra Adams, was the chief executive officer and a shareholder of Maze, Inc. She owned 60% of the outstanding stock of Maze. In 2019, Kendra and Maze, as co-borrowers, obtained a $100,000 loan from United National Bank. This loan was secured by Kendra’s personal residence. Although Maze was listed as a co-borrower, Kendra repaid the loan in full in 2022. On Maze’s Form 1120 tax returns, no loans from shareholders were reported. Discuss whether Kendra is entitled to a bad debt deduction for the amount of the payment on the loan.

Partial list of research aids:

U.S. v. Generes, 92 S.Ct. 827 (1972).

Dale H. Sundby, T.C.Memo. 2003–204.

Arrigoni v. Comm., 73 T.C. 792 (1980).

Estate of Herbert M. Rapoport, T.C.Memo. 1982–584.

Clifford L. Brody and Barbara J. DeClerk, T.C. Summary Opinion, 2004–149.