Commissioner v. Tufts

Holding

On disposition of property subject to nonrecourse debt, the full unpaid balance of the debt is included in the amount realized even if it exceeds the fair market value of the property.

Facts

Tufts and partners transferred property subject to nonrecourse mortgage debt exceeding fair market value. They argued amount realized should be limited to FMV.

Reasoning

Justice Blackmun reaffirmed and extended the Crane principle, holding that nonrecourse debt assumed by the transferee is fully included in amount realized regardless of FMV. The decision is foundational for partnership and real-estate workouts.