Blitza Inc

question 102

Multiple Choice

Blitza Inc. owned real property used for 12 years in its business that was subject to a $294,500 nonrecourse mortgage. Blitza failed to make timely mortgage payments, so the creditor foreclosed. At date of foreclosure, Blitza's basis in the property was $300,000, and the property's appraised FMV was $260,000. Which of the following statements is true?

• A) Blitza has no legal obligation to settle the $34,500 unpaid balance of the mortgage.
• B) Blitza recognizes a $40,000 Section 1231 loss.
• C) Blitza recognizes a $5,500 Section 1231 loss.
• D) Both Blitza has no legal obligation to settle the $34,500 unpaid balance of the mortgage and Blitza recognizes a $5,500 Section 1231 loss is true.

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Definitions:

Labor Costs

Expenses associated with employing labor, including wages, salaries, benefits, and taxes.

Average Total Cost

The total cost of production divided by the total output or quantity produced.

Average Variable Cost

Calculated by dividing the total variable costs by the quantity of output produced; it shows the variable cost per unit of output.

Marginal Cost

The supplementary expenditure brought on by the creation of one more unit of a good or service.