Charles Bruun (plaintiff) leased land and an old building to a tenant for a period of 99 years. The tenant was allowed to make improvements to the land, but the improvements would be forfeited back to Bruun if the lease was canceled at the tenant’s fault. The tenant removed the old building, constructed a new building, and subsequently failed to pay rent and taxes. Bruun received the property back, including the new building, which was valued about $50,000 higher than the old building. Guy Helvering, the commissioner of internal revenue (defendant), issued a deficiency notice against Bruun for failing to report any income resulting from the receipt of the property. Bruun sought a redetermination from the Board of Tax Appeals, which found for Bruun. The court of appeals affirmed. The United States Supreme Court granted certiorari.