3) Carter had assets with a FMV of $60,000 and liabilities of $75,000. By agreement of its creditors, the liabilities were reduced to $55,000. Assuming no special elections are made, what amount of income must Carter report as a result of the cancellation of indebtedness?

a) $0 b) $5,000 c) $15,000 d) $20,000

4) Margaret Mason entered into a 10-year lease to rent property. During the first year, in addition to $5,000 for that years rent. Margaret received $5,000 in advance as rent for the last year of the lease, and a $4,000 security deposit. What income must Margaret report for the first year?

a) $5,000 b) $9,000 c) $10,000 d) $14,000