University of Miami Law Review


Steven Kass


The United States Supreme Court has granted certiorari to the United States Court of Appeals for the Fifth Circuit to determine whether a taxpayer, upon disposition of property, must include the full amount of nonrecourse liability in the "amount realized" when determining gain or loss on the disposition. The author criticizes the Fifth Circuit's reliance on Crane v. Commissioner's infamous footnote 37, which intimates that the amount of nonrecourse debt included by a taxpayer in the amount realized should be limited to the fair market value of the property encumbered by the nonrecourse debt. This limitation results in the inconsistent valuation of nonrecourse debt in the unadjusted basis (depreciable base) on acquisition and in the amount realized on disposition.