Logourl black
From our private database of 14,200+ case briefs...

Crane v. Commissioner

United States Supreme Court
331 U.S. 1 (1947)


Facts

Upon the death of her husband in 1932, Crane (plaintiff) became the beneficiary of an apartment building and lot. The building and lot were subject to a mortgage, consisting of a principal debt of $255,000.00 and interest in default of $7,042.50. The value of the property for estate tax purposes was the amount of the entire encumbrance, or $262,042.50. For the next seven years, Crane managed the property and collected rents for the mortgagee. During this time, she took deductions related to the property, including deductions for property depreciation. By 1938, the interest owed had increased and the mortgagee threatened to foreclose. At that time, Crane sold the property and received, after expenses, $2,500.00. In calculating her gain in the sale of the property, she believed that the term “property” referred to her equity in the building and lot. Under this theory, the property she acquired was the value of the building and lot less the amount of the mortgage. In other words, she had zero equity in the building, which she later sold. Crane found the amount realized in the sale to be $2,500.00 and the cost basis to be zero. Because the Tax Code requires reporting of only half the amount realized in the sale of a capital asset held for more than two years, Crane reported only $1,250.00 as taxable gain. The Commissioner (defendant), on the other hand, argued that “property” referred to the building and lot itself, not their equity. According to the Commissioner, the original basis was the 1932 appraisal value of $262,042.50 and, because Crane had taken depreciation deductions on the building, he adjusted the basis accordingly. He calculated the amount realized to include the principal amount of the mortgage in addition to the $2,500.00 net profit, totaling $257,500.00. The case was heard in the Tax Court to determine Crane’s taxable gain. The Tax Court held in Crane’s favor. The Court of Appeals reversed. The United States Supreme Court granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Vinson, C.J.)

Dissent (Jackson, J.)

What to do next…

  1. Unlock this case brief with a free (no-commitment) trial membership of Quimbee.

    You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 97,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.

  2. Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.

    Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.

Here's why 240,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 14,200 briefs, keyed to 189 casebooks. Top-notch customer support.
  • The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
  • Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.