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Reporting 2008 Tax Return

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The question is as follows:

Celeste had one of her best employees leaving town to get away from a troublesome ex husband. In order for her friend to establish a business elsewhere, in March 2007 Celeste loaned her $7,000 on a 6% note to be paid back in one year. On December 30, 2008 Celeste found out that her employee had filed for bankruptcy and was awaiting trial on felony theft charges. Celeste has never received any interest on the loan.

How would Celeste would report this on her 2008 Tax return.

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Given than Celeste has recorded an interest income in her 2007 tax return, she is not related to her employee, the debt is payable February 28, 2009, the loan is not guaranteed by a third ...

Solution Summary

The solution determines how Celeste will report her 2008 tax return.

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Peck report as an income tax refund receivable

Peck Co. reports a taxable and pretax financial loss of $400,000 for 2008. Peck's taxable and pretax financial income and tax rates for the last two years were:


The amount that Peck should report as an income tax refund receivable in 2008, assuming that it uses the carryback provisions and that the tax rate is 40% in 2008, is

a) $120,000
b) $140,000
c) $160,000
d) $180,000

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