A taxpayer came to you for help in preparing her tax return in 2019. The taxpayer was unmarried, and her salary was $250,000 in 2019. The taxpayer lived in a condo unit that she purchased in 2019 for $250,000 ($50,000 in cash and $200,000 recourse loan secured by a mortgage on the unit). In 2019, the taxpayer paid the lender mortgage interest totaling $8,000, and she paid a $9,000 local property tax on the condo unit. According to her W-2, she had stock that she held for several years. In addition, the local government condemned land for a public purpose that the taxpayer had owned. The taxpayer purchased the land as an investment two years ago for $200,000. The local government paid the taxpayer $180,000 for the land. Finally, in 2019 the taxpayer realized a $5,000 loss on a limited partnership interest in a local restaurant. In 2020, the taxpayer lost her job. She had purchased a vacation cottage several years ago for $150,000, the purchase price funded in part with a recourse loan. She used the vacation cottage solely for personal purposes. The taxpayer refinanced the loan with a $70,000 cash out a few years ago to pay off her student loans. The vacation cottage later dropped in value to $175,000 because of saturation in the real estate market. When the outstanding balance of the recourse loan on the vacation cottage was $210,000, the lender accepted the vacation cottage in full satisfaction of the loan. The taxpayer continued making payments on her condo (the outstanding balance of this loan was $190,000 and the condo’s fair market value was $240,000). The fair market value of her limited partnership interest was $60,000. She did not own any additional assets or have any additional liabilities. Hence, the taxpayer’s assets totaled $475,000 (condo $240,000, LP interest $60,000, and vacation cottage $175,000), and her liabilities totaled $400,000 ($190,000 condo loan and $210,000 vacation cottage loan) when the lender accepted the cottage in full satisfaction of its mortgage loan. A) What are the taxpayer’s tax consequences, including the amount of her adjusted gross income, for 2019? B) What are the taxpayer’s tax consequences on the transfer of the vacation cottage in full satisfaction of the loan?

A) For the 2019 tax year, the taxpayer's tax consequences would include: 1. Salary Income: $250,000 from her W-2. 2. Mortgage Interest Deduction: She can deduct the $8,000 of mortgage interest paid on her condo as an itemized deduction on Schedule A. 3. Property Tax Deduction: She can also deduct the $9,000 of property taxes paid on her condo as an itemized deduction on Schedule A, subject to the $10,000 cap on state and local taxes (SALT) under the Tax Cuts and Jobs Act. 4. Capital Loss on Land: The taxpayer realized a loss of $20,000 ($200,000 purchase price - $180,000 sale price) on the condemned land. Since this is an investment property, the loss can be deducted against capital gains. If there are no capital gains to offset, up to $3,000 of the loss can be deducted against ordinary income, with the remainder carried forward to future tax years. 5. Loss on Limited Partnership Interest: The $5,000 loss on the limited partnership interest in a local restaurant is likely a passive activity loss. If the taxpayer does not have passive income, the loss may be suspended and carried forward to future years under the passive activity loss rules. The taxpayer's adjusted gross income (AGI) for 2019 would be calculated as follows: Salary: $250,000 Less: Capital Loss Deduction (

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