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As a result of the foreclosure sales, petitioners were
relieved of personal liabilities totaling $131,847, and it has
been stipulated that they received no other amounts from the
sales. Accordingly, the amount realized by petitioners was
$131,847. The parties have stipulated that petitioners' adjusted
basis in the properties totals $117,422, and that both properties
were held for more than 1 year. Petitioners, therefore,
recognized a long-term capital gain in the amount of $14,425 from
the foreclosure transactions, measured as the difference between
the amount realized and their adjusted basis.
Petitioners argue that they could not have had any capital
gain from the foreclosures because they lost the properties and
even though the foreclosure proceeds exceeded their mortgage
liabilities, none of the proceeds was received by them. We note
first that respondent is no longer attempting to tax petitioners
on the proceeds that exceeded the mortgage payoffs. But as to
the proceeds used to pay off the mortgages, petitioners
apparently believe that they must have actual receipt of money or
property in order to have taxable gain for income tax purposes.
This contention has been rejected by the Supreme Court. Crane v.
Commissioner, supra at 13; United States v. Hendler, supra at
566. Rather, a taxpayer is treated as having gain when he
benefits from having his debts paid off, as if the money were
first paid to the taxpayer and then paid over by him to his
creditors. Crane v. Commissioner, supra; United States v.
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