Jolie purchased her residence in 2010 for $500,000 by borrowing $450,000.In 2013,she becomes unemployed and can no longer afford to make the full monthly payment on the mortgage.When the mortgage balance is $430,000,the bank agrees to reduce her mortgage to avoid foreclosure.What is Jolie's basis in her residence if the bank agrees to reduce the mortgage on the residence to $300,000?

Question

Quizplus · Accepted Answer

Jolie's basis in her residence is not affected by the reduction in her mortgage. Her basis is simply the amount she initially paid for the residence, which is $500,000. The reduction in the mortgage only affects the amount she owes to the bank, but it does not change the amount she paid for the property. Therefore, her basis remains at $500,000.

Jolie Purchased Her Residence in 2010 for $500,000 by Borrowing