Insolvent in the current year and is adjudged bankrupt

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Karen formed Grebe Corporation with an investment of $100,000 cash, for which she received $10,000 in stock and$90,000 in 7% interest-bearing bonds maturing in ten years. A few years later, Karen loaned Grebe an additional$60,000 on open account. Grebe becomes insolvent in the current year and is adjudged bankrupt. Karen was the president of Grebe Corporation and was paid an annual salary of $50,000 for the past three years. Karen has no other employment. How will Karen treat her losses for tax purposes?

Reference no: EM13918814

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