Peggy is in the business of factoring accounts receivable. Last year, she purchased a $30,000 account receivable for $25,000 . This year, the account was settled for $25,000 . How much loss can Peggy deduct and in which year?
a. $5,000 for the current year.
b. $5,000 for the prior year and $5,000 for the current year.
c. $5,000 for the prior year.
d. $10,000 for the current year.
e. None of the above.
e
RATIONALE: Peggy's basis in the debt is $25,000 . Therefore, her loss for the current year is $0 ($25,000 – $25,000).
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