A borrower is personally liable on a real estate mortgage with an outstanding balance of $1.5 million.

Question:

Borrower's basis in the property is $1 million and the property has a current fair market value of $1.2 million. The property is repossessed by the bank.

a. Ifthe borrower is insolvent both before and after the repossession, what taxable gain, if any, is recognized by borrower?

b. Does your answer to

(a) change if the borrower is not personally liable on the mortgage (i.e., a nonrecourse debt)?

Why or why not?

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CCH Federal Taxation Basic Principles 2020

ISBN: 9780808051787

2020 Edition

Authors: Ephraim P. Smith, Philip J. Harmelink, James R. Hasselback

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Question Posted: Feb 18, 2024 06:45 AM

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A borrower is personally liable on a real estate mortgage with an outstanding balance of $1.5 million.

Question:

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a If the borrower is insolvent both before and after the repossession the taxable gain recognized by ...View the full answer

CCH Federal Taxation Basic Principles 2020

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