Johnson v. Commissioner

¶1dissenting: Though I agree with the dissent of Judge Hill, I wish, at the risk, perhaps, of repeating what may be inferrible from what he says, to add, as additional reasons for my dissent, the following: The petitioner, in the beginning, had a tract of real estate and necessarily some basis therein. That real estate was later improved with a building by the lessee, and in 1929 the petitioner received that building when she repossessed the property. Though she did not report as income the value of the building, we now know this should have been done, Helvering v. Bruun, 309 U. S. 461; and it appears altogether clear that proper bookkeeping methods required that if such value was included in income, an equal amount was chargeable to capital account. Section 113 (a), Internal Kevenue Code, provides that the basis of property shall be the cost except as adjusted, and subsection (b) (1) provides for adjustment thereof “For … receipts … or other items properly chargeable to capital account … In my view, the value of the building when received by petitioner in 1929 was chargeable to capital account, regardless of whether it was actually included in income and then charged to capital account, so that under the literal language of the statute petitioner’s base in the property should be adjusted by the value of the building erected on the real estate and received by petitioner.