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The issue of whether petitioners had discharge of
indebtedness income in 1987 from the satisfaction of mortgages on
the Third Street property, or whether, as petitioner contends,
any gain or loss should have been recognized in 1985 is disposed
of by our conclusion that equitable ownership of the property was
transferred in 1985.
Section 1001 states that the gain from a sale or other
disposition of property is the excess of the amount realized over
the taxpayer's adjusted basis as provided in section 1011.
Section 1001(b) defines the amount realized as the sum of any
money received plus property received. Liabilities assumed or
paid by a purchaser are included in the amount realized by the
seller on the sale. Crane v. Commissioner, 331 U.S. 1, 13-14
(1947).
Since petitioners' interest in the property was transferred
in 1985 he had no income from discharge of indebtedness in 1987.
When the purchase agreement was entered into, petitioner
transferred to the law partnership any interest he had in the
Third Street property. The law partnership at that time obtained
the property, subject to any obligations thereon. The Crane case
dealt with property taken subject to a mortgage, and the Court
specifically stated that the amount of the mortgage debt to which
the property was subject was additional consideration for the
property in the year the property was transferred subject to the
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