Easson

The Tax Court had jurisdiction to hear taxpayer’s 1 petition to redetermine a deficiency asserted by the Commissioner (§ 272(a) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 272 (a)). This court has jurisdiction on appeal (§ 7482, Internal Revenue Code of 1954, 26 U.S.C.A. § 7482 ).

In 1952 taxpayer owned and operated an apartment house in Portland, Oregon. On June 19, 1952, taxpayer encumbered the apartment house with a $250,000 mortgage, taxpayer himself signing and assuming personal liability on the notes underlying the mortgage. In October of 1952, taxpayer formed the Envoy Apartments, an Oregon corporation, and transferred the property, subject to the mortgage, to the corporation in exchange for all of its capital stock. Taxpayer, however, remained personally liable on the notes. The Tax Court found that taxpayer had a legitimate business purpose in consummating this transaction and that his principal purpose was not tax avoidance.

At the time of the transfer, the basis of appellant’s property was $87,214.86, and its fair market value was $320,000. The principal balance of the mortgage was $247,064.01. Taxpayer and his wife, on their 1952 returns, reported no gain in…