It is notable (and thus appears frequently in law school casebooks) for holding that under section 22(a) of the Revenue Act of 1932, income need not be in the form of cash for it to be taxable.

Gain may occur as a result of exchange of property, payment of the taxpayer's indebtedness, relief from a liability, or other profit realized from the completion of a transaction.

The court held for the government: under the Revenue Act of 1932, the value of the improvements was realized by the taxpayer as income in the year in which the forfeiture occurred.

These provisions overrule the proposition announced in Bruun, that repossession of an asset with an enhanced value from a transaction with another party results in recognition of gross income.

The aim of the Revenue Act of 1942 was to relieve lessors—suddenly confronted with large tax obligations—of the need to raise cash in a hurry, at a time when the real estate market was scraping bottom.

An inadvertent side effect of the means chosen—permitting current income to be deferred to later period—was to reduce the lessor's tax obligation absolutely, by postponing his realization of any improvements to the sale of the property.