Question

Before any debt cancellation, PeppersCo holds business land with a $2,400,000 fair market value, a $1,000,000 tax basis, and a related mortgage of $3,000,000. In lieu of foreclosure, the lender reduces the mortgage principal by $1,300,000. What are the Federal income tax consequences of the debt cancellation?  

As a result, PeppersCo recognizes income of 0$ and decreases its basis in the land basis by ______$?  

I need to know how to calculate my land basis after debt cancellation

Answer 1