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Assume the same facts as in the previous problem, except that at the beginning of year 1
$ 7.00

Assume the same facts as in the previous problem, except that at the beginning of year 1 Jessica loaned Bikes-R-Us $3,000.  In year 2, Bikes-R-Us reported ordinary income of $12,000. What amount is Jessica allowed to deduct in year 1?  What are her stock and debt bases at the end of year 1?  What are her stock and debt bases at the end of year 2?

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