*243 Decision will be entered for the respondent.
Decedent inherited from her husband, in 1936, a house and lot which had by them been used as homestead. She removed from the property within a few days, and told her son to rent or sell it. It was forthwith listed for sale. No effort was ever made to rent and it was never rented. About seven months later the house was razed because of advice that the property would be more readily salable vacant, and in order to save taxes. In 1948 the vacant property was sold. Held, the property was a capital asset and the Commissioner did not err in limiting the loss under section 117 (a) (1) and (d) ( 2) of the Internal Revenue Code.
*632 This case involves the income tax liability of Maria Assmann, deceased, for the taxable year January 1, 1948, *245 to July 12, 1948. Deficiency was determined in the amount of $ 7,286.24. The only question for our consideration is whether the sale of certain real estate by her resulted in capital loss, as Commissioner asserts, or in ordinary loss, as contended by the petitioners.
FINDINGS OF FACT.
All facts were stipulated.
The petitioners are the duly appointed, qualified and acting coexecutors of the last will of Maria Assmann, deceased. Maria Assmann, *633 hereinafter referred to as the decedent, died a resident of Newark, New Jersey, on July 12, 1948. The decedent's return for the period here involved was filed with the collector of internal revenue for the fifth collection district of New Jersey.
The alleged deficiency of $ 7,286.24 is attributable to the respondent's determination in the notice of deficiency that the decedent's estate is entitled to a deduction of $ 1,000 for a capital loss sustained in connection with the sale of realty located at 155 Grove Street, East Orange, New Jersey, in lieu of a loss of $ 18,557.80 claimed by the estate as an ordinary loss from the sale or exchange of property other than capital assets.
Title to the property was inherited by the decedent*246 upon the death of her husband, Franz A. Assmann, on February 19, 1936. At that time the property consisted of a large frame dwelling with the plot on which it stood.
The property had been the Assmann homestead for many years prior to the death of Franz A. Assmann, and had been occupied by the decedent and her husband as their home up to that time.
The decedent, within several days following her husband's funeral, removed from the property, never returned to it, and took up her residence with a married daughter in Newark, New Jersey, where she continued to reside until her death.
The decedent immediately following her removal from the property, directed her son, Frank A. Assmann, to rent or sell the property and it was forthwith listed for sale with an East Orange, New Jersey, realtor. No effort was ever made to rent the property nor was it ever rented.
A sale not at once materializing, the decedent was advised by realtors that the property would be more readily salable if the residence, which was obsolete, were razed.
For the reasons set forth in the preceding paragraph, and in order to save taxes, the dwelling was thereupon razed in September 1936, and efforts were renewed to sell*247 the vacant land.
The decedent received the amount of $ 75 for the salvage taken from the razed dwelling.
The land was sold in January 1948 for $ 8,000. The expenses of the sale aggregated $ 1,228.80.
The property remained unimproved at the time of the sale in January 1948.
The value of the property (land and building) was included in the estate tax return of Franz A. Assmann at $ 25,329, being the appraised value of the land alone, it being the opinion of the appraiser that the building had only nominal value.
The petitioners claimed in the income tax return of the decedent, for the taxable year January 1, 1948, to July 12, 1948, a deduction *634 from gross income of $ 18,557.80, being the difference between the net sale price of the property, $ 6,771.20 and $ 25,329, the basis to the decedent, adjusted for the net amount of $ 600 received on a defaulted sale but not adjusted for the $ 75 received for salvage.
No income was ever received by the decedent from the property from the date of her acquisition of the property in February 1936 to its sale in January 1948.
The property was never put to use by the decedent from the date of her removal from the property in February 1936*248 until its sale in January 1948, other than being held for sale.
The decedent was not generally in the business of buying and selling or developing real estate.
OPINION.
Our only problem here is whether or not the real estate sold was a capital asset, within the intendment of section 117 (a) of the Internal Revenue Code. 1*249 The answer will determine whether the loss taken by Maria Assmann upon the sale is to be limited, under section 117 (d) (2)2 to $ 1,000, 3 as determined by the Commissioner. There is no disagreement as to basis or amount received upon sale.
We need not again detail the facts set forth above. The gist of the petitioners' contention is that the property sold having been inherited, its tax status was then neutral, that its tax status thereafter is dependent upon the intention of the inheritor-taxpayer, and that it was her intent to rent or dispose of the property, as shown by her permanent removal therefrom within a few days after*250 her husband's *635 death, her prompt direction that the property be rented or sold, the razing of the property seven months later after advice that sale would thereby be facilitated, and her failure to make any personal use of the property from time of her removal to its sale. Therefore, it is argued, the petitioners are entitled to a full deduction of the loss sustained in a transaction entered into for profit, under section 23 (e) (2) of the Internal Revenue Code. Reliance is placed upon Estelle G. Marx, 5 T. C. 173; N. Stuart Campbell, 5 T.C. 272">5 T. C. 272; Solomon Wright, 9 T. C. 173; and George W. Carnrick, 9 T.C. 756">9 T. C. 756.
The respondent, on the other hand, argues, in substance, as follows: that the only category of non-capital asset specified in section 117 (a) of the Internal Revenue Code which the petitioners attempt to apply is "real property used in the trade or business of the taxpayer," that the property was not so used; therefore deduction for loss must be limited to $ 1,000 under section 117 (d) (2). Respondent cites Beck v. Commissioner, 179 Fed. (2d) 688,*251 affirming a Memorandum Opinion of this Court, and distinguishes N. Stuart Campbell, supra, as one where the inherited property was listed for rent or sale rather than merely for sale as in this case, so that an effort, though fruitless, to rent was held to constitute trade or business. Here, he points out, though the petitioner asserts "undeviating intention" of the decedent to rent or dispose of the property at the earliest possible moment, it is stipulated that "No effort was ever made to rent the property nor was it ever rented." He argues also that claims of loss under section 23 (e) (2), as the petitioners suggest this sale to be, are subject to the limitation provided by section 117 (d) the same as claims of loss under section 23 (e) (1). He adds that the exclusion from "capital assets" of real property used in trade or business is limited to property used in trade or business at the time of sale, under Regulations 111, section 29.117-1, and that, at the time of sale of this property, it was vacant property, not used in trade or business.
We first note that section 117 (d) (2) is general in its terms, applying its limitation broadly to*252 "losses from sales or exchanges of capital assets," therefore that there is not the distinction, suggested by petitioners, between losses from sales "incurred in trade or business," under section 23 (e) (1), and those "incurred in any transaction entered into for profit, though not connected with the trade or business," under section 23 (e) (2), which the petitioners (specifically, on brief agreeing that the taxpayer "had no trade" and "had no business") claim this loss to have been. Not only is section 117 (d) (2) general, but section 23 (g) is equally so; it provides that losses from sales or exchanges of capital assets shall be allowed only to the extent provided in section 117. No distinction is made between losses under section 23 (e) (1) and 23 (e) (2), nor does Regulations 111, section *636 29.23 (g)-1 make such distinction. The regulations are not here attacked.
Section 117 (a) (1) provides, initially, that the term "capital assets" means "property held by the taxpayer." The property here involved was held by the taxpayer. It was therefore a capital asset unless shown to be within the exceptions, stated immediately following the above language. Since the petitioners*253 on brief specifically disclaim any contention that the property was stock in trade, because the taxpayer "had no trade" or property held for sale in the ordinary course of business, because the taxpayer "had no business," the only remaining exception to "capital assets," stated in section 117 (a) (1), is "real property used in the trade or business of the taxpayer." However, in arguing distinction of Beck v. Commissioner, supra, relied on by respondent, the petitioners on brief state:
The claim by the Becks was that their loss was one sustained in their trade or business. In the instant case no such claim is or could be made. Taxpayer was never in business and never has claimed she was. Her claim was for a loss sustained in a transaction entered into for profit. Of course the transaction out of which the taxpayer sustained the loss was a business transaction, but it was an isolated piece of business entered into for a sole purpose -- to make a profit.
In the face of these statements, on brief, that the decedent had neither trade nor business, it is logically difficult to see how any exception from "capital assets" can be applied here. *254 If one has no trade or business how can it be contended that real property is used in trade or business? However, since the above statements were, in part, in connection with the earlier exceptions as to "stock in trade" and property held "primarily for sale to customers in the ordinary course of his trade or business," and since "real property used in the trade or business" is the only exception petitioners can mean to invoke, we proceed to examine the argument made.
It amounts, it seems, to this: That the decedent's intent governs, that she never intended to devote the property to personal use but intended to rent or dispose of it, which was done, in an "isolated piece of business entered into for a sole purpose -- to make a profit." It is stipulated, however, that though the decedent immediately on removal from the property directed her son to rent or sell the property and that it was immediately listed for sale, "No effort was ever made to rent the property nor was it ever rented," also that "The property was never put to use by the decedent from the date of her removal" until its sale. From these stipulated facts it appears: First, that the petitioners are not justified in*255 contending that it was decedent's intent to rent or sell. She merely directed her son either to rent or sell. The property was "forthwith" listed for sale, and no effort was ever made to rent, nor was it ever rented. This status continued from about February 19, *637 1936, to about January 1948 -- more than eleven years. If she had any intention of renting, it was very brief, for listing for sale was "forthwith" with no effort at any time to rent. Whether she, or someone else, listed the property for sale does not appear. To conclude that though no effort was made to rent, she intended nevertheless, for eleven years, to rent, borders upon the absurd. We conclude that she did not so intend for more than a very short time. Second, the property was never put to use by the decedent after the date of her removal from it. This plainly negatives the requirement of section 117 (a) that the real property, to be a non-capital asset, must be used, in the trade or business.
In short, the stipulation and petitioners' concessions on brief contravene all three of the elements of the statutory expression: The real property was not used, the decedent had no trade, the decedent had no*256 business. The petitioners nevertheless contend that there was sale with profit motive, making the loss one from a non-capital asset. Considering the cases cited for such contention, we find that N. Stuart Campbell, supra, involved sale of an inherited house and land. We first held that the loss was deductible as against respondent's contention that there was no transaction entered into for profit under section 23 (e) (2), for it had been stipulated that the inherited property was, as soon as legally possible after inheritance, placed in the hands of real estate agents to sell as soon as possible or rent if unable to sell promptly, and that two other real estate firms tried to sell the property. We said, therefore, that the loss was allowable deduction "except to the extent that it is limited by section 117 of the code." The petitioner indeed conceded that the land itself was "capital asset" and that the loss thereon was capital. Here the respondent does not deny deductibility, but only deductibility as a non-capital loss, so that, as to the land there involved, the Campbell case is of no value to the petitioners here. As to the building in *257 the Campbell case, the petitioner contended for ordinary loss and it was allowed, on the ground, in effect, that the building was "property used in the trade or business of a character which is subject to the allowance for depreciation," apparently upon the theory that the efforts to rent constituted business. The instant case is clearly distinguishable because it involves no building, no efforts to rent, and no business, under petitioners' concessions. Instead of contending, as in the Campbell case, that the efforts at renting a building constituted business, here petitioners affirm that there was loss in an isolated business transaction entered for profit, disclaiming at the same time any claim of being in business. Estelle G. Marx, supra, also relied on by petitioners, does not touch the present question of capital or non-capital loss, for it merely decided that the sale was in a transaction entered into for profit -- which the respondent does not here deny. He merely says that the limitation of section *638 117 (d) applies regardless of whether the transaction was one for profit, for it involved a capital asset -- a point nowhere *258 mentioned in the Marx opinion. The situation in George W. Carnrick, supra, is in pertinent part similar to that in the Marx matter. The prime question was whether there was transaction entered for profit, on sale of a house and lot. There was active effort to rent the property, or sell it, so that, as to the house only, there was business, and ordinary loss was allowed; as to the land -- which only we have here -- only capital loss was allowed. Solomon Wright, supra, did involve land left after the house thereon was destroyed, in a way similar to the instant situation; and there the question was whether loss was capital or ordinary. But there the house had been for several years prior to its destruction by hurricane, in September 1938, rented to tenants by the petitioner, who devoted a small part of his time to real estate activities consisting of renting the house in question and one other. Early in 1939 he placed the property for sale with real estate agents and it was sold in 1943. In holding for the petitioner we said: "Its character as real property used in his business was not lost and did not change*259 under the facts as stipulated." Obviously, the case has no application here, where decedent had no real estate activities, the property had never been rented, she never tried to rent, instead razed the building and held the land for sale for eleven years.
Beck v. Commissioner, supra, relied upon by the respondent, involved a half interest in vacant lots, inherited from one engaged, in part, in real estate activities. As in this case, it was listed for sale but never for rent. Various plans were made for using the property for business purposes, but no such use eventuated. The half interest in the property was finally sold, for a small sum to a co-owner. In affirming this Court's conclusion that the property was not real estate used in trade or business, the United States Court of Appeals said:
It is evident that the taxpayers were not engaged in trade or business in which the real estate was used; they never appropriated the lot to the trade or business of developing property -- actually it was not put to any use, for it was vacant and unimproved; * * *
The petitioners, on brief, seek to distinguish the Beck case as a claim of loss sustained*260 in trade or business. Reference to our opinion discloses, however, that we were there, just as here, construing the applicability of the last clause of section 117 (a) (1), providing as exception to capital assets "real property used in the trade or business of the taxpayer"; and though petitioners here assert distinction from the Beck case, between claims under section 23 (e) (1) and 23 (e) (2), we have above seen that the limitations imposed by section 23 (g) and section 117 (d) apply alike to any losses under section 23 (e), if from sales or exchanges of capital assets. We discern no distinction in principle between this case and the Beck matter. The fact that here *639 the vacant property had at one time, some eleven years before sale, been improved by a house is immaterial, under Regulations 111, section 29.117-1 limiting the exclusion from "capital assets" of property used in trade or business "to such property used * * * in the trade or business at the time of the sale * * *."
We conclude and hold that the real property was a capital asset and that the Commissioner did not err in limiting the loss on sale thereof under section 117 (d).
Decision will be entered*261 for the respondent.
Footnotes
1. SEC. 117. CAPITAL GAINS AND LOSSES.
(a) Definitions. -- As used in this chapter --
(1) Capital assets. -- The term "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property, used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 23 (l), or an obligation of the United States or any of its possessions, or of a State or Territory, or any political subdivision thereof, or of the District of Columbia, issued on or after March 1, 1941, on a discount basis and payable without interest at a fixed maturity date not exceeding one year from the date of issue, or real property used in the trade or business of the taxpayer;
* * * *↩
2. SEC. 117. CAPITAL GAINS AND LOSSES.
* * * *
(d) Limitation on Capital Losses. --
* * * *
(2) Other taxpayers. -- In the case of a taxpayer, other than a corporation, losses from sales or exchanges of capital assets shall be allowed only to the extent of the gains from such sales or exchanges, plus the net income of the taxpayer of [or] $ 1,000 whichever is smaller. For purposes of this paragraph, net income shall be computed without regard to gains or losses from sales or exchanges of capital assets. If the tax is to be computed under Supplement T, "net income" as used in this paragraph shall be read as "adjusted gross income."↩
3. No gains from sales or exchanges of capital assets are here involved.↩