Phoebe purchased her home for $180,000. The mortgage holder foreclosed on the recourse loan when she stopped making payments. At the time of foreclosure, the outstanding debt was $170,000 and Phoebe's adjusted basis was $185,000. Fair market value of the property was $175,000.

What is Phoebe's realized gain or loss on the foreclosure?

$15,000 nondeductible loss.

$10,000 nondeductible loss.

$5,000 nondeductible loss.

$5,000 gain.