ADMS 2610 Lecture : The Law of Property - Chapter 24 - The Law of Mortgages

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purplewoodchuck173

26 Jan 2012

School

York University

Department

Administrative Studies

Course

ADMS 2610

Professor

Sam Ling

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Document Summary

Nature of mortgages: legal vs. equitable, equity of redemption. conditions of discharge: transfer title of property to the creditor, found (true form) in registry systems. Charge: a secured claim (similar to mortgage) registered against real property under the land titles system, does not transfer property to the creditor. Historically: land an important form of wealth, pledged as security for debt, originally means of securing debt by transferring an interest in land, common law agreement was strictly enforced. harsh results: equitable doctrine of redemption. only first mortgage may be the legal mortgage. Equitable mortgage (second or subsequent mortgage: a mortgage subsequent to the first or legal mortgage a mortgage of the mortgagor s equity. Equity of redemption: equitable right of a mortgagor to acquire title to the mortgaged property by payment of the debt secured by the mortgage.

Related Questions

Marge owns land and a building (held for investment) with anadjusted basis of $75,000 and a fair market value of $250,000. Theproperty is subject to a mortgage of $400,000. Because Marge is inarrears on the mortgage payments, the creditor is willing to acceptthe property in return for canceling the amount of themortgage.

a. How can the adjusted basis of the property be less than theamount of the mortgage?

b. If the creditor's offer is accepted, what are the effects onthe amount realized, the adjusted basis, and the realized gain orloss for Marge?

c. Does it matter in (b) if the mortgage is recourse ornonrecourse?

raspberryyak84

Mandarin Company bought land for $100,000 that it held for apossible future plant site. Mandarin Company bought the propertyfor $20,000 cash payment and by signing a note secured by amortgage on the land in the amount of $80,000.

Property values in the area increased significantly. When theland was worth, $300,000, Mandarin Company took out a new mortgageof $250,000 and paid off the $100,000 existing mortgage loan.

Property values in the area then decreased a great deal, andMandarin Company could no longer make the payments on the mortgage.When Mandarin Companyâs land had a fair market value of $175,000,the lender foreclosed on the mortgage. The lender forgave theentire debt because of Mandarin Companyâs deteriorating financialcondition. The balance of the mortgage at the time ofthe foreclosure was $190,000 but Mandarin Company was not bankruptor insolvent.

How much gain or loss did Mandarin Company realize on theforeclosure? How much, if any, gain or loss must it recognize? Howmuch gross income does Mandarin Company recognize as income fromthe discharge of indebtedness?

Required: The memo should include the facts, issue, conclusionand discussion on your answer.