In the Crane v. Commissioner of Internal Revenue case in 1946, the U.S Supreme Court ruled on a tax dispute involving property depreciation and mortgage liability. The plaintiff, Beulah Crane inherited an apartment building from her husband with a fair market value greater than its outstanding mortgage debt. She claimed deductions for depreciation based on the full value of the property but did not include any portion of this debt as income when she sold it at a profit years later. The IRS disagreed with her approach and assessed additional taxes against her. The court sided with the IRS, ruling that taxpayers must consider both their equity investment and any outstanding mortgages when calculating their basis for claiming depreciation deductions or determining gain/loss upon sale of such properties. This decision established what is now known as "Crane Principle," which holds that unpaid mortgage balances are included in one's taxable income if they're relieved from personal liability after selling mortgaged properties.

In the dissenting opinion for Crane v. Commissioner of Internal Revenue, Justice Harold Hitz Burton argued that the majority's interpretation of Section 113(a) was incorrect and inconsistent with its original intent. He contended that Congress intended to tax only actual economic gain, not theoretical or potential gains. In this case, Mrs. Crane had not realized any economic benefit from her husband’s estate because she inherited a property encumbered by nonrecourse debt which exceeded its fair market value at the time of inheritance and sale. Therefore, he believed it was inappropriate to include in her gross income an amount equal to such debt when calculating capital gain on subsequent sale of said property as there was no real increase in wealth for Mrs.Crane due to this transaction.