$13$ Dogskin Enterprises is an LLC that has elected to be taxed as a partnership. Six years ago, Dogskin bought an office building in a growing suburb of a nearby city, paying $$200,000$ down and taking out a recourse mortgage for $$800,000.$ Despite a promising beginning, things have not gone well with renting the building and Dogskin defaulted on its loan early in $2024.$ Rather than see the mortgagee foreclose on the building, Dogskin last week negotiated a deal with the lender where the company signed over a deed in lieu of foreclosure and the lender discharged the debt. At the time, the fair market value of the building was $$650,000,$ the principal balance on the loan was $$750,000,$ and Dogskin$$s basis in the property was $$550,000.$

a$.$ Assume Dogskin is solvent after the discharge. What are the tax consequences of the agreement to Dogskin?

b$.$ Assume the same facts as above, except Dogskin Enterprises is insolvent both before and after the discharge.