In addition to being an employee of Rock Hard Roofing Material, Lou owns 10% of the company's
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In addition to being an employee of Rock Hard Roofing Material, Lou owns 10% of the company's common stock. Rock Hard falls on hard times in 2020. To forestall bankruptcy, Rock Hard's employees and shareholders loan the company $1,000,000. Lou's share of the total loan is $50,000 - $25,000 related to her position as an employee and $25,000 related to her ownership of stock. In early 2021, creditors force Rock Hard into bankruptcy. Lou loses her entire $50,000.
a. Is Lou's loss related to a trade or business or an investment?
b. Can Lou deduct her loss as a bad debt expense?
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Related Book For
Concepts In Federal Taxation 2022
ISBN: 9780357515785
29th Edition
Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher
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