Steiger Company owned investment land subject to a $715,000 recourse mortgage. Steiger failed to make timely mortgage payments, so the creditor foreclosed. At date of foreclosure, Steiger's basis in the land was $587,300, and the land's appraised FMV was $690,000. Steiger completely settled its recourse debt by paying $25,000 cash to the creditor. As a result of the foreclosure, Steiger recognizes:

Question

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The first step is to calculate the amount realized by Steiger from the foreclosure sale. Since Steiger settled the mortgage debt for $25,000, the amount realized is $690,000 - $25,000 = $665,000.

The next step is to compare the amount realized to Steiger's adjusted basis. Since Steiger's basis was $587,300, the foreclosure results in a gain of $665,000 - $587,300 = $77,700.

However, because the land was held as an investment, the gain must be treated as a capital gain. Therefore, Steiger recognizes a capital gain of $77,700.

Choice C is the only option that accurately reflects this calculation.

Steiger Company Owned Investment Land Subject to a $715,000 Recourse