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Gold Company was experience financial difficulties, but was not bankrupt or insolvent.
Gold Company was experience financial difficulties, but was not bankrupt or insolvent. The National Bank which held a mortgage on other real estate owned by Gold, reduced the principal from $110,000 to $85,000. The bank had made the loan to Gold when it purchased the real estate from Silver, Inc. Pink, Inc. the holder of a mortgage on Gold's building, agreed to accept $40,000 in full payment of the $55,000 due. Pink had sold the building to Gold for $150,000 that was to be paid in installments over 8 years. As a result of the above, Gold must:a) Include $40,000 in gross incomeb) Reduce the basis in its assets by $40,000c) Include $25,000 in gross income and reduce its basis in its assets by $15,000d) Include $15,000 in gross income and reduce its basis in the building by $25,000e) None of the above