Basu, who was experiencing financial difficulties, adjusted his debts as follows. Determine the Federal income tax consequences from these events.
a. Basu is an attorney. Basu owed his aunt Veena $25,000. Veena told Basu that if he serves as the executor of her estate, Basu's debt will be canceled in Veena's will.
b. Basu borrowed $80,000 from First Bank. The debt was secured by land that Basu purchased for $100,000. Basu was unable to pay, and the bank foreclosed when the liability was $80,000, which was also the fair market value of the property.
c. The Land Company, which had sold land to Basu for $80,000, reduced the mortgage principal on the land by $12,000?