Ficia Inc Owned Investment Land Subject to a $294,500 Recourse Mortgage

question 61

Multiple Choice

Ficia Inc. owned investment land subject to a $294,500 recourse mortgage. Ficia failed to make timely mortgage payments, so the creditor foreclosed. At date of foreclosure, Ficia's basis in the land was $300,000, and the land's appraised FMV was $260,000. The creditor informed Ficia that it would not pursue collection of the $34,500 unpaid balance of the mortgage. Which of the following statements is true?

• A) Ficia recognizes $34,500 ordinary income and a $40,000 capital loss.
• B) Ficia recognizes only a $40,000 capital loss.
• C) Ficia recognizes only a $5,500 capital loss.
• D) None of these choices are correct

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