Peggy Is in the Business of Factoring Accounts Receivable

Multiple Choice

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.