Commissioner v. Tufts, 461 U.S. 300 (1983), was a unanimous decision by the United States Supreme Court, which held that when a taxpayer sells or disposes of property encumbered by a nonrecourse obligation exceeding the fair market value of the property sold, the Commissioner of Internal Revenue may require him to include in the “amount realized” the outstanding amount of the obligation; the fair market value of the property is irrelevant to this calculation.

)[1] The taxpayers argued that their tax consequences should equal the excess of fair market value over basis.

The Court began by noting that all gains or losses on the disposition of property must be realized, under section 1001(a) of the Internal Revenue Code.

[6] The Court defended its position by observing that the stated requirements force a taxpayer to account for the proceeds of obligations he has received tax-free and included in the property's basis.

[8] In applying the opinion's statement of law to the present facts, the Court concluded that the taxpayers’ disposition of property realized a gain of approximately $400,000; not their claim of a $55,740 loss.