McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 29

Jimmy has fallen on hard times recently.Last year he borrowed $250,000 and added an additional $50,000 of his own funds to purchase $300,000 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 $230,000.For each of the following independent situations, indicate the amount Jimmy must include in gross income and explain your answer:
a.The real estate is worth $175,000 and Jimmy has no other assets or liabilities.b.The real estate is worth $235,000 and Jimmy has no other assets or liabilities.c.The real estate is worth $200,000 and Jimmy has $45,000 in other assets but no other liabilities.