A purchased an office building from B for $1,000,000, which represented the building's fair market value. In connection with this purchase, A signed a mortgage payable to B, for $1,000,000. Sometime later, when the value of the building declined to $800,000 and the outstanding principal on the note was $1,000,000, B reduced the principal amount on the note to $800,000. Assuming A is solvent, how should the $200,000 reduction in the mortgage be treated for tax purposes?

a. The reduction will have no immediate effect for tax purposes. b. The buyer/debtor A must recognize $200,000 as income from the discharge of indebtedness c. The buyer/debtor A will recognize no income but reduce his basis in the property by $200,000. d. The seller/lender B will reduce his selling price by $200,000. e. Both c. and d.