Mixed 90

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Tom purchased a building for $500K. Tom paid $100K cash down and gave a non-recourse note secured by a mortgage on the property for the $400K balance. Tom held the property as an investment. In answering the following question, ignore the land, as if only the building were purchased and sold. (1) What is Tom’s basis for depreciation? (2) Over the next several years, Tom properly deducts $300k of depreciation, pays $100k on the mortgage principal, and makes all required interest payments. Tom then sells the building to Paul, who takes the property subject to the remaining $300k mortgage and pays Tom $250k cash. What is the amount of Tom’s realized gain or loss? (3) Suppose instead that after Tom had properly deducted the $300k of depreciation and reduced the mortgage principal to $300k, the building declined in value to $275k, at which point Tom surrendered the property to the mortgagee. What result to Tom? (4) Same as (3), except that the building was worth only $150k when it was surrendered to the mortgagee. (5) How would your answers in (3) differ if Tom had been personally liable on the indebtedness, but the mortgagee had accepted the property in full satisfaction of the indebtedness? Assume here that Tom is insolvent immediately after the debt discharge. (6) How would your answers to (4) differ if Tom had been personally liable on the indebtedness, but the mortgagee had accepted the property in full satisfaction of the indebtedness? Assume here the Tom is insolvent immediately after the debt discharge.