Monty loaned his friend Ned $18,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $15,300, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the $15,300 as a nonbusiness bad debt. Last year, Monty had capital gains of $6,120 and taxable income of $47,250. During the current year, Ned paid Monty $13,770 in satisfaction of the debt.
Determine Monty's tax treatment for the $13,770 received in the current year.
The nonbusiness bad debt of $15,300 would have been reported as a short term capital loss. How much would be included in Monty's gross income?