Cramer v. Commissioner 55 T.C. 1125 (Tax. Ct. 1971) Cramer sold her house to Osborn under a "land sale contract." That's like an installment plan, where Osborn was to pay Cramer monthly payments and also pay the property taxes. Osborn was a deadbeat who didn't pay. Eventually, Cramer paid the property taxes herself and foreclosed the property. Later that same year, Cramer sold the house to someone else for no gain. At the same time, Cramer's mother was sick, so Cramer was looking after her house and paying the property taxes there as well. Also at the same time, Cramer had bought herself a new house, and was paying the property taxes there as well. When Cramer filed her taxes, she deducted the amounts paid in property taxes on all three residences. The IRS denied the deduction. Cramer appealed. The IRS argued that only the property taxes paid on Cramer's new house were deductible. The Tax Court found mostly for the IRS. The Tax Court found that the property tax Cramer paid for her Mom's house was not deductible. The Court looked to 26 U.S.C. §164, which allows a deduction for real property taxes, but they are, in general, "deductible only by the person upon whom they are imposed." Since the house wasn't owned by Cramer, and she wasn't liable to pay the taxes, she couldn't claim the deduction even though she was the one who paid the taxes. The money should be treated like a gift from Cramer to Mom (see 26 U.S.C. §102). See Old Colony Trust Co. v. Commissioner (279 U.S. 716 (1929)), which dealt with a similar issue. The Court found that the property tax Cramer paid for the house she sold to Osborn was partially deductible. The Court looked to §164(d)(1), which says that property taxes paid on property that was bought or sold is prorated. In this case, the Court determined that Cramer owned the property for 48 out of the 365 days of the tax year in question, so she is allowed to deduct 48/365th of the amount she paid in property taxes on that house.