Lead Opinion

*537OPINION.

Maequette:

The taxpayer claims the right to deduct the cost of a parcel of land purchased in the year 1909', and a foundation wall erected thereon between the years 1909 and 1913, as a loss in the year 1919, upon the ground that the property was abandoned as worthless in that year. The Commissioner denied the loss, upon the ground that it was not a realized loss, as the title to the property was still vested in the taxpayer and no loss had been sustained within the meaning of the law. The taxpayer alleges that it abandoned the property in 1919 and wrote it off on its books as having no value.

Section 234(a) (4) of the Revenue Act of 1918 authorizes, as deductions in computing net income, “Losses sustained during the taxable year and not compensated for by insurance or otherwise.” *538The testimony produced tends to show that the property in question had decreased in value, due to changes in the neighborhood, that it was not desirable as a building site, and that taxes had been permitted to accumulate against it until they equaled or exceeded its then value. Assuming all this to be true, the taxpayer did not sustain a loss in the taxable year.

It is well settled that title to real property can not be lost by abandonment alone. 1 Corpus Juris, 10. In 1 Ruling Case Law, p. 2, section 2, it is stated:

The characteristic element of abandonment is a voluntary relinquishment of ownership, whereby the thing so dealt with ceases to be the property of any person and becomes the subject of appropriation by the first taker.

In the case of East Tennessee Iron & Coal Co. v. Wiggin, 68 Fed. 446, 449, Judge Lurton, who delivered the opinion of the court, said:

Precisely what is meant by “ an abandoned ” legal title is hard to define. If it is the valid legal title, it is inconceivable how it can be abandoned.

Here there is no question but that the legal title to the property attempted to be abandoned was in the taxpayer, and remained in it until after the taxable year in question. It could exercise dominion over it to the exclusion of everyone else, and it is difficult to conceive how it could sustain a loss with respect to the property and still have the property to deal with as its own. True, the value of the property may have declined by reason of changed conditions and the taxpayer’s neglect to pay taxes thereon. In fact, every piece of property upon which taxes are permitted to accumulate and which is located in a neighborhood which has become undesirable, necessarily suffers a diminution in its mar bet value, but it has never been held that a taxpayer could deduct as a loss the diminution in value of land the title to which is still retained, and the difference is one of degree only. Losses from dealing in real or personal property, growing out of the ownership thereof, are deductible only when ascertained and determined upon an actual, completed, and closed transaction during the taxable year, and are not sustained through the mental processes by which a taxpayer determines that the property is worthless and charges it off on its books, while it still retains the title to the property itself.

The taxpayer has treated the purchase of the tract of land described in the findings of fact, the sale of a part thereof, and the alleged abandonment of the balance as one transaction, but its own actions show conclusively that such was not the case, for the reason that, when it sold part of the land and the houses erected thereon, it *539retained to itself the land the cost of which it now seeks to write off through an attempted abandonment. When the houses were sold, a gain or loss accrued to the taxpayer, measured by the difference between the cost and selling prices of the buildings and the land upon which they were situated. This constituted one transaction. Likewise, a gain or loss would accrue upon the remaining part only through a sale or other disposition thereof, which would constitute another and different transaction. The taxpayer seeks to complete this latter transaction by a book entry, based upon its own estimate of the value of the land. The purpose of the attempt to write off the value of the property not sold as worthless in the taxable year was to obtain a deduction which would in part offset the gain realized on the property sold and thus reduce the tax thereon. It may be that the equity of the taxpayer in the unsold lots was of little value because of the accumulated taxes,'but we think that a loss is sustained, within the meaning of the law, only when it is a realized loss and is evidenced by a completed and closed transaction.

We are, therefore, of the opinion that a taxpayer may not deduct as a loss the cost of real estate and improvements, the title to which it retains; yet, even if we were to hold that the title to real estate could be abandoned and the cost thereof written off as a loss, we do not think the taxpayer would be entitled to deduct, in the year 1919, the cost of the lots and foundation wall involved herein. The taxpayer permitted taxes to accumulate against the property from the year 1909 to the year 1917, and in the latter year permitted it to be sold for taxes; and, if we were to recognize that it could and did, in fact and in law, abandon the property, we would be constrained, to hold that such abandonment occurred not later than the year 1917.

The evidence produced in this appeal establishes that the taxpayer in 1909 paid $47,500 for the parcel of land bounded by One hundred and sixty-seventh Street, One hundred and sixty-eighth Street, Olay Avenue and Teller Avenue, and that the value of the lots on Teller Avenue, because of their contour and unfavorable condition for building, had a value of only one-fifth of the value* of the entire tract. Therefore, $9,500 of the cost of the entire parcel of land should be allocated to the Teller Avenue lots and the remainder to* that part of the land which the taxpayer sold in the year 1919. In other respects, the determination of the Commissioner is approved.