In 2007, Lisa (a single taxpayer) loaned $20,000 to her friend Jessica. In 2014, Jessica declared bankruptcy, with the result that the debt became totally worthless. How should Lisa treat the loss relating to this debt (assume that the debt is a nonbusiness debt that is a bona fide debt that arose from a debtor-creditor
relationship)?
a. As an itemized deduction
b. As a short-term capital loss
c. As a long-term capital loss
d. Lisa may not take any deduction relating to the debt (it is a nonbusiness debt)