In 2000, Michael purchased land for $100,000. Over the years, economic conditions deteriorated, and the value of the land declined to $60,000. Michael sells the property in this year, when it is subject to a $30,000 nonrecourse mortgage. The buyer pays Michael $34,000 cash and takes the property subject to the mortgage. Michael incurs $5,000 in real estate commissions. Michael's gain or loss on the sale is

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Michael's amount realized is $64,000 ($34,000 cash + $30,000 mortgage). His adjusted basis is $105,000 ($100,000 purchase price + $5,000 commissions). The loss is $41,000 ($64,000 - $105,000).

In 2000, Michael Purchased Land for $100,000