No. Sam does not realize any Gross income. Palmer says that buying at a discount is not gross income. Yes. All three Glenshaw Glass factors met. 1k. His basis is what he paid for it. IRC S61(a)(3) gains derived from dealings in property. If you're hit with 9k tax for GI you can reduce gross income by basis. 10 - 1 = 9. Under S1001 this is clearly realized.