What type of tax deduction is applicable to George, who made loans to a corporation as an investor?

In this scenario, the appropriate deduction for George would be the nonbusiness bad debt deduction. This deduction applies to loans made to a corporation when the loans become worthless and are not part of a trade or business. Nonbusiness bad debts are treated as short-term capital losses and can offset capital gains, providing a tax benefit to the investor.

Nonbusiness bad debts are specifically distinct from business bad debts, which relate to debts directly tied to the taxpayer's business operations. Since George is an investor and his loan to the corporation does not qualify as related to a business he owns, the deduction falls under nonbusiness bad debt.

Additionally, while options mentioning "no deduction for worthless loans" and "ordinary loss for worthless loans" might suggest potential grounds for deductions, they do not correctly categorize the situation. The tax code explicitly allows for nonbusiness bad debt deductions, emphasizing the importance of categorizing debts correctly based on the nature of the investment.