Verified Document

Federal Taxation Case Facts: Wilma Research Paper

Even if no actual money changed hands, anything inherited and then sold may have taxable value (Prendergast, 1982; Yin, 2002). Cases such as Crane v. Commissioner (1947) and Commissioner v. Tufts (1983) reaffirm the concept that there are many different kinds of taxable gains and a large number of individuals fail to realize that anything they acquire must be accounted for (Bittker, 1978; Pino-Anderson, 1982). By addressing the different between recourse and nonrecourse debt, those who find themselves in inheritance situations attempt to avoid taxation on the property they acquire because there was debt owed on that property at the time it was bequeathed to them (Cunningham, 1984; Isaac & O'Leary, 2012). The belief is that the object that was inherited is worth only as much as (or appreciably less) than the debt that was owed on it, so there should not be any taxation of that object (Isaac & O'Leary, 2012; Yin, 2002). However, the debt was not acquired by the person who inherited the object, so there is taxable value in the object itself (Yin, 2002).

Conclusion: Since Wilma has already taken title to Bob's house, she is trapped in the sense that she cannot simply walk away with no repercussions. However, if she allows the bank to foreclose on the house the debt will be gone and the house will no longer be hers to deal with. Since she did not make any money off the sale of the house, she will not have any gain realized. If she does not allow the bank to foreclose, but works with the bank to take a settlement on the mortgage instead, she will gain the house but she will also gain the value of the house and have to pay taxes on that value.

This...

Since the best option (never taking title to the house) is no longer a realistic option, Wilma must do the next best thing and let the bank foreclose on the house so she does not negotiate with the bank to pay off something and then take ownership of the house with a lower mortgage (or no mortgage) owed. That would be a gain realized, and would require taxes to be paid.
References

Barris, J. (2008) an expert system for appraisal by the method of comparison. PhD Thesis, UPC, Barcelona

Baum, a., Nunnigton, N., & Mackmin, D. (2011) the Income Approach to Property Valuation (6th Edition). Estates Gazette, London

Bittker, Boris I. (1978). "Tax Shelters, Nonrecourse Debt, and the Crane Case." Tax Law Review 33: 277.

Commissioner v. Tufts, 461 U.S. 300 (1983)

Crane v. Commissioner, 331 U.S. 1 (1947)

Cunningham, Alice (1984). "Payment of Debt with Property -- the Two-Step Analysis after Commissioner v. Tufts." Tax Lawyer 38: 575.

Isaac, D., & O'Leary, J. (2012) Property Valuation Principles (2nd Edition), Palgrave MacMillan, London

Pino-Anderson, E. (1982). "Contra Tufts: The Case against the Fair Market Value Limitation on Amount Realized." Pacific Law Journal 14: 79.

Prendergast, Angela (1982). "The Crane Controversy Continues -- Tufts v. Commissioner." Chicago-Kent Law Review 59: 731.

Yin, George K. (2002). "The Story of Crane: How a Widow's Misfortune Led to Tax Shelters." In…

Sources used in this document:
References

Barris, J. (2008) an expert system for appraisal by the method of comparison. PhD Thesis, UPC, Barcelona

Baum, a., Nunnigton, N., & Mackmin, D. (2011) the Income Approach to Property Valuation (6th Edition). Estates Gazette, London

Bittker, Boris I. (1978). "Tax Shelters, Nonrecourse Debt, and the Crane Case." Tax Law Review 33: 277.

Commissioner v. Tufts, 461 U.S. 300 (1983)
Cite this Document:
Copy Bibliography Citation

Related Documents

Taxation an Alien Is a Person Who
Words: 1727 Length: 5 Document Type: Essay

Taxation An alien is a person who is neither an American national nor citizen. A non-resident alien is a person who has not qualified after taking the presence examination or the green card evaluation. The American government taxes non-resident aliens only on earnings from U.S. commerce sources. Consideration of income is effective based on commerce or trades within the U.S.A. And is ineffective based on income outside USA sources (Fellows, 2012).

Taxation in the United States the Taxation
Words: 4341 Length: 15 Document Type: Essay

Taxation in the United States The taxation system of the United States of America is flawed in many ways; meanwhile there are some benefits of this system as well. The current taxation system of the United States needs to be analyzed to point out the flaws in the system. The main purpose of this paper is to discuss the current components of this system with respect to the flaws and good

Taxation and Price Control Taxes
Words: 981 Length: 3 Document Type: Thesis

In this way, taxation on sellers also diminishes the market in question, as both supply and demand lower to reach the new equilibrium. The ultimate effect of all forms of taxation on goods is therefore that both buyers and sellers are affected, as the market responds to both changes in demand and supply, regardless of which carries the initial effect. II. PRICE CONTROLS and TAXATION on MILK According to Chris Edwards (2007),

Taxation Sales Taxes on Clothing
Words: 892 Length: 2 Document Type: Essay

The tax holiday was more likely to benefit families that had "the disposable income to buy an $80 sweater for their teen"(De La Torre 2008). To extend this argument, the effect upon equilibrium price and quantity demanded by such non-price sensitive consumers was negligible, resulting in no net benefit to the state's retailers or middle-class consumers. The sales tax holiday on clothing was as equally regressive as a sales

Taxation and Distribution for Trenton,
Words: 1552 Length: 5 Document Type: Essay

2.) Consider implementing a tax which targets tourists and visitors to New Jersey, with the funds being directly allocated to school districts in the state. A hotel and lodging tax, or a sporting ticket tax, if relatively minor and unobtrusive, could easily bridge the gap between New Jersey's stated educational goals, and the funding capacity necessary for their achievement. 3.) Provide attainable goals for students so that the level of educational

Taxation Impact of Taxes on Business Owners
Words: 2512 Length: 9 Document Type: Essay

Taxation Impact of taxes on business owners Tax Implications on Salary and Dividend Payments The amount of money that a business takes out has important implication of tax amount that the business will be liable to pay. But for the case of sole proprietorships and partnerships, it makes no difference how much or when the money is taken out of the business. After all, owners of both partnerships and sole proprietorships pay personal

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now