Crane v. Commissioner
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331 U.S. 1 (1947)
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U.S. Supreme Court
Crane v. Commissioner, 331 U.S. 1 (1947)
Crane v. Commissioner of Internal Revenue
Argued December 11, 1946
Decided April 14, 1947
331 U.S. 1
1. Under § 113(a)(5) of the Revenue Act of 1938, the "unadjusted basis" for determining gain or loss on the sale of physical property acquired by bequest subject to an unassumed mortgage is the value of the property undiminished by the amount of the mortgage. Pp. 331 U. S. 5-11.
The word "property," as used in that section, means a physical thing which is a subject of ownership or the owner's legal rights therein, and not merely his "equity" after deducting the amount of mortgages or other liens. Pp. 331 U. S. 5-11.
2. Under § 113(b)(1)(B) of the Revenue Act of 1938, a taxpayer who acquired an apartment house by bequest subject to an unassumed mortgage equal to the value thereof, operated it for several years, and sold it for a price slightly in excess of the amount of the mortgage, was entitled to deductions for depreciation on the building, and the "adjusted basis" for determining gain or loss on the sale is to be determined by deducting such depreciation allowances from the value of the property at the time of acquisition. Pp. 331 U. S. 11-12.
3. Under § 111(b) of the Revenue Act of 1938, the "amount realized" on a sale of property for cash subject to an existing mortgage is the amount of the cash realized plus the amount of the mortgage,
even though the seller had acquired the property subject to the mortgage, which he never assumed, and the buyer neither assumed nor paid the mortgage. Pp. 331 U. S. 12-14.
4. On an appeal from a decision of the Tax Court, the Circuit Court of Appeals had jurisdiction to review determinations by the Tax Court that "property" as used in § 113(a) and related sections of the Revenue Act of 1938, means "equity," and that the amount of a mortgage subject to which property is sold is not the measure of a benefit realized within the meaning of § 111(b), since these determinations announced rules of general applicability on clear-cut questions of law. P. 331 U. S. 15.
5. As here construed, the Revenue Act of 1938 does not tax something which is not "income" within the meaning of the Sixteenth Amendment. Pp. 331 U. S. 15-16.
153 F.2d 504 affirmed.
The Tax Court expunged part of a deficiency determined by the Commissioner of Internal Revenue on account of the income tax on a gain realized on the sale of an apartment house which had been acquired by the taxpayer by bequest subject to an unassumed mortgage. 3 T.C. 585. The Circuit Court of Appeals reversed. 153 F.2d 504. This Court granted certiorari. 328 U.S. 826. Affirmed, p. 331 U. S. 16.