The bank forecloses on Lisa's apartment complex. The property had been pledged as security on a nonrecourse mortgage, whose principal amount at the date of foreclosure is $750,000. The adjusted basis of the property is $480,000, and the fair market value is $750,000. What is Lisa's recognized gain or loss?
A) $270,000
B) ($750,000)
C) $0
D) ($480,000)
E) None of the above

Question

Quizplus · Accepted Answer

Lisa's recognized gain is calculated as the difference between the amount realized (the debt forgiven, which is $750,000) and the adjusted basis of the property ($480,000). Therefore, the recognized gain is $750,000 - $480,000 = $270,000.

The Bank Forecloses on Lisa's Apartment Complex