Court Opinion

ID: 9442707
Source: CourtListenerOpinion
Date Created: 2023-08-03 18:56:18.669984+00
Date Added: 2024-06-11T17:29:11.596480
License: Public Domain

MAGRUDER, Chief Judge
(concurring).
I concur. The logic of the court’s opinion is inescapable, with Crane v. Commissioner, 331 U.S. 1, 67 S.Ct. 1047, 91 L.Ed. 1301, as the starting point.
As an original matter, I would have had some difficulty in understanding how the taxpayer in the Crane case realized more than $3,000 from her sale of the mortgaged property there involved, in view of the definition of “amount realized” in § 111(b) of the Internal Revenue Code. By the same token in the case at bar, under the more natural and obvious reading of § 111 (b), it would seem that the amount realized by the taxpayer herein was zero, when he caused his straw man to quitclaim to the banks, for no cash consideration, properties then subject to mortgages up to their full value, the taxpayer not being liable on the mortgage debt. To reach the conchision that the taxpayer thereby “realized” the amount of the outstanding mortgage debt would seem to require a somewhat esoteric interpretation of the statutory language. Also, I do not clearly understand why the Treasury allowed the taxpayer deductions for depreciation, under §§ 23(1) and (n) and § 114(a), in the total amount of $45,280.48, taking the taxpayer’s original “cost” basis as the amount of the mortgages, though he made no cash investment in the properties upon acquisition, nor did he obligate himself on the mortgage debt. But that matter need not concern us here, because depreciation in the amount of $45,280.48 was in fact “allowed”; and under § 113(b), the adjusted basis for determining gain or loss from the sale 'or other disposition of the property takes account of depreciation “to the extent allowed (but not less than the amount allowable)” under the income tax laws.
Perhaps the net result reached by the court here might be arrived at by another mode of computation with less strain upon the statutory language. Thus, the adjusted basis for determining gain or loss under § 113(b) might be computed as follows: Original cost, zero, plus $13,989.38, the total amount which taxpayer paid in reduction of the mortgage debt while he held the properties, minus $45,280.48, the amount of depreciation “allowed”, which comes out to an adjusted basis of minus $31,291.-10. Now, apply that adjusted basis of minus $31,291.10 to the computation of gain or loss under the formula in § 113(a) : The “amount realized” upon taxpayer’s “disposition of the properties, zero (as suggested above), minus the adjusted basis as computed under § 113(b), or in other words, *460minus $31,291.10 subtracted from zero, comes out to a plus figure of $31,291.10, representing the amount of the taxpayer’s gain, upon which the tax would be computed.