Helvering v. Bruun

Holding

A landlord realizes taxable income upon repossession of leased property when the lessee has constructed improvements that increase the property's value, even though no cash or severable property is received.

Facts

A tenant under a 99-year lease built a new building on the leased land. The lease was forfeited in 1933 and the landlord repossessed the land along with the building. The Commissioner asserted that the unamortized value of the building represented taxable income to the landlord in the year of repossession.

Reasoning

The Court held that gain need not be in the form of cash or severable from the principal property to be taxable. The improvements were a realized accession to wealth attributable to the lease transaction. Congress had constitutional power under the Sixteenth Amendment to treat such an accretion as income.