The issue was the amount of income taxpayers must realize when they sell property.Initially, the IRS was convinced that Congress's all-inclusive definition of income required taxpayers to include all sale proceeds in gross income.Taxpayers, on the other hand, argued that a portion of proceeds from a sale represented a return of the cost or capital investment in the underlying property (called tax basis).Consequently, when taxpayers sell property, they are allowed to reduce the sale proceeds by their unrecovered investment in the property to determine the realized gain from the sale.