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18 March, 11:08

Change the facts in the preceeding problem by assuming that the $120,000 mortgage on Lyle's real estate is nonrecourse. Determine the tax consequence to Lyle if the mortgage holder forecloses on the real estate.

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  1. 18 March, 13:13
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    Calculating the bad debt loss as follows:

    Mortgage - fair market value of

    property = $120,000 - $100,000

    $20,000

    Calculating the capital profit as follows:

    Fair market value of property - Adjusted basis = $100,000 - $75,000=

    $25,000
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