Vic, who was experiencing financial difficulties, was able to adjust his debts as follows: a. Vic is an attorney. Vic owed his uncle $25,000. The uncle told Vic that if he serves as the executor of the uncle's estate, Vic's debt will be canceled in the uncle's will. The $25,000 debt cancellation is Vic's gross income when the uncle dies. b. Vic borrowed $80,000 from First Bank. The debt was secured by land that Vic purchased for $100,000. Vic was unable to pay, and the bank foreclosed when the liability was $80,000, which was also the fair market value of the property. Vic has a $fill in the blank 564552fca057f99_1 as a result of the foreclosure. c. The Land Company, which had sold land to Vic for $80,000, reduced the mortgage on the land by $12,000. The $12,000 reduction in the debt is Vic's gross income and Vic must his basis in the property.
Problem 5-56 (LO. 4)
Vic, who was experiencing financial difficulties, was able to adjust his debts as follows:
a. Vic is an attorney. Vic owed his uncle $25,000. The uncle told Vic that if he serves as the executor of the uncle's estate, Vic's debt will be canceled in the uncle's will.
The $25,000 debt cancellation is Vic's gross income when the uncle dies.
b. Vic borrowed $80,000 from First Bank. The debt was secured by land that Vic purchased for $100,000. Vic was unable to pay, and the bank foreclosed when the liability was $80,000, which was also the fair market value of the property.
Vic has a $fill in the blank 564552fca057f99_1 as a result of the foreclosure.
c. The Land Company, which had sold land to Vic for $80,000, reduced the mortgage on the land by $12,000.
The $12,000 reduction in the debt is Vic's gross income and Vic must his basis in the property.
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