Question

The bank forecloses on Lisa's apartment complex. The property had been pledged as security on a nonrecourse mortgage, whose principal amount at the date of foreclosure is $750,000. The adjusted basis of the property is $480,000, and the fair market value is $750,000. What is Lisa's recognized gain or loss?

a. $270,000
b. ($750,000)
c. $0
d. ($480,000)
e. None of the above

Answer 1

The recognized gain or loss for Lisa on the foreclosure of her apartment complex is $0.

Step-by-step explanation:

The recognized gain or loss for Lisa on the foreclosure of her apartment complex can be calculated by subtracting her adjusted basis from the fair market value of the property. In this case, her adjusted basis is $480,000 and the fair market value is also $480,000. Therefore, her recognized gain or loss is $0 (option c).