331 U.S.1, 67 S. Ct.1047,91 L.Ed.1301,1947 U.S.3021 - Essay Example

Crane v. Commissioner Case brief affiliation: Introduction There are many important tax cases that have been heard by theUnited States Supreme Court. However, only a few of them are identifiable just by the reference to a footnote number. Crane v. Commissioner is a good example of these cases. Tax scholars and academicians worldwide easily recognize the decision of this case simply by the reference to its footnote, 37. Crane has been an important case in tax history, and by far, its footnote 37 has been the most famous footnote.

This case is widely considered as a landmark Supreme Court decision in the tax world. It was the genesis of the current tax law which states that if a buyer assumes a nonrecourse debt upon the sale of a property, that assumption will be equivalent to receiving cash proceeds from the seller of the property and thus should be included in the calculation of tax. The following section gives a brief of Crane v. Commissioner. (Lau, 2007). Brief Fact SummaryThe petitioner’s husband died and because she was the sole beneficiary of the will, she had to inherit all the property he owned.

Among the property, there was an apartment he had built on mortgage. Therefore, the petitioner contracted with the mortgaging company to continue operating the property and remit the net rental to the company.FactsThe petitioner was the sole beneficiary of the will her husband had written. Her husband owned an apartment building and a lot which were subject to a mortgage. The apartment building was valued at 255,000 US dollars. The petitioner entered into an agreement with the mortgaging company to allow her continue operating the property.

The agreement allowed the petitioner to remit the net rentals to the mortgaging company. The apartment building did not have equity and this was because the outstanding balance on the mortgage and the interest in arrearage equaled the total appraisal value of the apartment. This petitioner owned the apartment for seven years and during this time, she claimed depreciation deductions. The petitioner later sold the apartment to a third party for 3000 US dollars which she paid 500 US dollars for expenses incurred during the selling process.

The third party also took the apartment subject to a mortgage. Because the petitioner believed that she had no basis on the property, she took zero depreciation, and thus, the sale of the property generated a gain of 2500 US dollars. The Commissioner of Internal Revenue determined that the petitioner had realized a net taxable gain of 23, 767.03 US dollars. The Commissioner’s theory was that the property was not equity but it was a physical property. The Tax Court held for the petition but the decision was later reversed by the Court of Appeals.

Later on, the Supreme Court granted certiorari. (Lau, 2007). IssueDid the original basis that was with the petitioner include the value of the property inherited in full, undiminished by the debt of the loan? Should the amount of the debt assumed by the third party be included in the petitioner’s calculation of the realized amount from the sale?HeldThe Chief Justice issued the opinion for the United States Supreme Court in affirming that the decision of lower court and he held that the proper basis should be the value of the property that was undiminished by the mortgage.

DissentChief Justice issued a dissenting opinion by arguing that the petitioner had acquired the right to property which was equal to that of equity and that she had sold the equity. The Court examined the ordinary meaning of property and realized that it included the physical thing which was subject to ownership. It found that the Congress did not intend for “equity” to mean “property”. (Lau, 2007). ReferencesLau, K. (2007). Crane v. Commissioner: An inquiry into some techniques of statutory interpretation.