Graham and Lucy purchased their home in 2002 for $400,000.They finance the purchase with a $350,000 mortgage.In 2011,when their original mortgage balance was $340,000,they took out a second mortgage for $100,000 and added a second garage.In 2013,they fall upon hard times and cannot make the mortgage payments.The mortgage company sells their home for $350,000.At the time of the sale,the mortgage balances are $330,000 on their home and $90,000 on their second mortgage.The mortgage company cancels the remaining debt.What are the income tax consequences of the sale of the residence and cancellation of the debt by the mortgage company?

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The Answer of Graham and Lucy purchased their home in 2002 for $400,000.They finance the purchase with a $350,000 mortgage.In 2011,when their original mortgage balance was $340,000,they took out a second mortgage for $100,000 and added a second garage.In 2013,they fall upon hard times and cannot make the mortgage payments.The mortgage company sells their home for $350,000.At the time of the sale,the mortgage balances are $330,000 on their home and $90,000 on their second mortgage.The mortgage company cancels the remaining debt.What are the income tax consequences of the sale of the residence and cancellation of the debt by the mortgage company?

Graham and Lucy Purchased Their Home in 2002 for $400,000