Bob and Linda purchased their vacation home in 2010 for $400,000.They financed the purchase with a $350,000 mortgage.In 2013,they fall upon hard times and cannot make the mortgage payments,and their mortgage is foreclosed.The mortgage company sells the house for $300,000.At the time of the sale,the mortgage balance is $325,000.The mortgage company cancels the remaining debt on the mortgage.How much income do Bob and Linda have from the cancellation of the remaining debt on their home?

Question

Quizplus · Accepted Answer

The income from the cancellation of debt is calculated by subtracting the amount of debt cancelled from the original debt. In this case, the original debt was $350,000 and the cancelled debt was $325,000, leaving a cancelled debt amount of $25,000. Therefore, the income from cancellation of debt for Bob and Linda is $25,000. Choice B is the correct answer.

Bob and Linda Purchased Their Vacation Home in 2010 for $400,000.They