Question: Jack borrowed $4,500 to purchase a machine. He later borrowed $2,000 using the machine as collateral. Both notes are nonrecourse. Ten years later, the machine

Jack borrowed $4,500 to purchase a machine. He later borrowed $2,000 using the machine as collateral. Both notes are nonrecourse. Ten years later, the machine has an adjusted basis of zero and two outstanding not balances of $2,500 and $800. Jack sells the machine subject to the two liabilities for $1,000. What is his realized gain or loss?

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