Nicholas bought land from meredith for $150,000. nicholas paid $50,000 cash and gave meredith an 8% note for $100,000. the note was to be paid over a five-year period. when the balance on the note was $80,000, meredith began having financial difficulties. to accelerate her cash inflows, meredith agreed to accept $60,000 cash from nicholas in final payment of the note principal.
a. nicholas must recognize $20,000 ($80,000 - $60,000) of gross income.
b. meredith must recognize gross income of $20,000 ($80,000 - $60,000) from discharge of the debt.
c. nicholas is not required to recognize gross income, but must reduce his cost basis in the land to $130,000.
d. nicholas is not required to recognize gross income, since he paid the debt before it was due.
e. none of these choices are correct.