Flora Company owed $$95,000,$ a debt incurred to purchase land that serves as security for the debt.

Question $24$ options:

A$)$

If Flora had borrowed the funds from a bank, the bank accepts $$85,000$ in full payment of the debt, and Flora is solvent after the transfer, Flora does not recognize income, but the company must reduce the cost of the land by $$10,000.$

B$)$

If Flora had borrowed the funds from a bank and the bank accepts $$85,000$ in full payment of the debt, when the value of the property is $$80,000,$ Flora can deduct a loss.

C$)$

If Flora transfers to the bank other property with a basis of $$90,000$ and a fair market value of $$95,000$ in full payment of the debt, Flora can recognize a $$5,000$ loss.

D$)$

If the $$95,000$ is owed to the person who sold the property to Flora and that person accepts $$85,000$ in full payment for the debt, Flora does not recognize gain but must reduce its basis in the land.