Question

Help Save& Exit Submit 8 Check my work Five years ago, Firm SJ purchased land for $105,000 with $10,000 of its own funds and $95,000 borrowed from a commercial The bank holds a recourse mortgage negatve cash fiow. Assume that SJ ls solvent, any recognized loss is fully deductible, and SJ's marginal tax rate is 21 percent. (Cash pute SJ's positive or on the land. For each of the following independent transactions, com outflows should be indicated by a minus sign.) a. SJ sells the land for $38,000 cash and the buyer's assumption of the $80,000 principal balance of the mortgage. b. SJ sells the land for $118,000 cash and pays off the $80,000 principal balance of the mortgage c SJ sells the land for $84,500 cash and pays off the $80,000 principal balance of the mortgage. d. SJ defaults on the 80,000 mortgage. The bank forecloses and sells the land at public auction for $64,500. The bank notifies SJ that it will not pursue collection of the $15,500 remaining debt e. SJ defauits on the $80,000 mortgage. The bank forecloses and sells the land at public auction for $64,500. The bank requires SJ to pay off the $15,500 remaining debt a. Net cash flow b. Net cash flow e. Net cash flow < Prev 2of 3 ::: Next >

Answer 1

16561 Particulars 16562 Amount realized on sale in cash(a) 38,000.00118,000.00 4500o 64,5000 64500.00 16563 debt relief(b) 16564 basis of land('c) 1 80,000.00 -105,000.00105,000.00105,000.00 -105,000.00105,000.00 0.00 16565 gain/loss on sale (d a+bc)13000.00 13000.00 -2050000 -0500.00-40,500.00 16566 cancellation of debt (e') 16567 net gain or loss (-d+e) 16568 tax rate (g) 16569 tax value(h f*g) 16570 cash received on sale (i) 16571 debt repayment( j) 16572 net cash flow after tax (k-htitj 33,450.0033,450.0011,675.008,750.001,325.00 0.00 13,000.0013,000.00-20,500.00 -25,000.0040,500.00 0.35 4,550.004,55.00 7,175.008,75.00 14,175.00 38,000.00 118,000.00 84,500.00 64,500.00 64,500.00 0.00-80,000.00 80,000.0064,500.00 80,000.00 0.00 0.00 0.00 15,500.00 0.35 0.35 0.35 0.35

16561 Particulars 16562 Amount realized on sale in cash(a) 38000 16563 debt relief(b) 16564 basis of land('c) 16565 gain/loss on sale (d:a+b+c) 16566 cancellation of debt (e') 16567 net gain or loss (f-d+e) 16568 tax rate (g) 16569 tax value(h-f*g) 16570 cash received on sale (i) 16571 debt repayment( j) 16572| net cash flow after tax (kehti切ー+816570+816571+816569-+C16570+C 16571-С 16569-+D16570+D16571+016569--E16570+E16571+E16569- 118000 0 84500 64500 64500 105000 +816562+816563+816564 0 +B16565+816566 0.35 B16567 B16568 +B16562 0 105000 105000 +D16562 +D16563+D16564 0 +D16565+D16566 0.35 105000 105000 | +C165624C165634C16564 |:+E16562+E16563+E16564 |-+F16562+F16563+F16564 0 15500 +E16565+E16566 0.35 0 +F16565+F16566 0.35 F16567 F16568 +F16562 16565+C16566 0.35 E-E16567"E16568 +E16562 -64500 --C16567*C16568 D16567 D16568 D16562 C16562 16570+f16571+F16569