Before any debt cancellation, PeppersCo holds business land with a $2,400,000 fair market value, a $1,000,000 tax basis, and a related mortgage of $3,000,000. The lender reduces the mortgage principal by $600,000.

Assume Peppers is insolvent and that the land and mortgage are its only asset and liability. What are the Federal income tax consequences of the debt cancellation given the following independent scenarios? If an amount is zero, enter "0".

a. Peppers is insolvent, and the land and related mortgage are the only asset and debt, respectively. As a result, PeppersCo excludes $________ of the debt cancellation and (increases/decreases) its basis in the land basis by $________.

b. The mortgage is seller financing, and Peppers is solvent. The debt cancellation (is included in/has no effect on) gross income and Peppers' basis in the land (does not change/is increased/is decreased).

c. Peppers has filed for bankruptcy and the debt is discharged by that action. The discharge of debt is (included in/excluded from) gross income and the basis in the land is (increased/decreased) by $________.

Please give answers and explanations