Question

Jimmy has fallen on hard times recently. Last year he borrowed $343,000 and added an additional $73,000 of his own funds to purchase $416,000 of undeveloped real estate. This year the value of the real estate dropped dramatically, and Jimmy’s lender agreed to reduce the loan amount to $316,000.
For each of the following independent situations, indicate the amount Jimmy must include in gross income: (Leave no answer blank. Enter zero if applicable.)
a. The real estate is worth $253,800 and Jimmy has no other assets or liabilities.
b. The real estate is worth $325,100 and Jimmy has no other assets or liabilities.
c. The real estate is worth $277,800 and Jimmy has $47,200 in other assets but no other liabilities.

Answer 1

Answer and Explanation:

The indication of the amount in the following cases are shown below  

Particulars      Scenario a          Scenario b           Scenario c

Assets A          253,800             325,100                325,000

Less:

Liability to

be settle B       316,000              316,000              316,000

Income to be

recognised (A - B)    0                     9,100                9,000