*55 Decisions will be entered for the respondent.
Petitioner abandoned resort property as a secondary residence and immediately offered it for sale and/or rent. She retained the property for approximately 21 years receiving no rental income therefrom. Held, by the time of the years in issue petitioner could not have had a reasonable expectation of receiving any rental income and she never held the property for appreciation in value; hence, the property was not "property held for the production of income" within the meaning of secs. 167 and 212, I.R.C. 1954. Held, further, respondent's determination that petitioner failed to include a dividend in gross income upheld.
*34 The respondent determined the following deficiencies in the petitioner's Federal income taxes:
| Year | Deficiency |
| 1969 | $ 2,819.68 |
| 1970 | 1,569.57 |
| 1971 | 1,689.66 |
The issues in controversy are: (1) Whether certain property owned by petitioner was held for the production of income thereby permitting deduction of maintenance expense and depreciation thereon and (2)whether petitioner received a dividend in 1969 which she failed to include in gross income for that year.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts, together with the exhibits attached thereto, are incorporated herein by this reference.
Petitioner Ida Meredith resided in Oakland, Calif., at the time she filed her petition herein. Petitioner filed timely Federal income tax returns with the Internal Revenue Service for the calendar years 1969, 1970, and 1971.
In 1949 petitioner*57 and her then husband acquired land in Pebble Beach, Calif., a sometime resort area located approximately 125 miles from their Oakland residence. Shortly *35 thereafter they constructed a house on the property at a cost of $ 32,000. The Pebble Beach house was not their principal residence.
Petitioner's husband died in 1951 and petitioner became the sole owner of the Pebble Beach property, its furnishings, and its fixtures. At about the same time petitioner underwent surgery resulting in a pronounced alteration of her lifestyle. These events disposed her to sell the Pebble Beach property.
From 1951 through 1972, several real estate brokers in the vicinity of Pebble Beach were intermittently given listings at one time or another by petitioner to sell, or in some cases to rent, the property. The property was so listed during most of this period. Petitioner relied exclusively on these brokers to find a lessee or purchaser, and in 1972 the Pebble Beach property was sold for $ 90,000.
The agent handling the sale was Ruth A. Winslow (hereinafter Winslow), who from 1946 through 1972 was employed by Del Monte Properties Co. (hereinafter the company) or Del Monte Realty Co., a subsidiary*58 of the company until 1972. In 1951 petitioner contacted Winslow concerning the sale of the Pebble Beach property and assented to the asking price she suggested. The Pebble Beach property was then listed for sale with the company and remained so listed for most of the period 1951 through 1972.
Beginning in either 1969 or 1970, the company required that a property owner sign a formal agreement setting forth its right to sell a listing. Such an agreement, which contained an "exclusive right to sell" provision, generally remained in effect from 1 to 6 months. The company had an exclusive listing on the Pebble Beach property at various times from 1969 to 1971. During these years, when the company did not have such a listing, the Pebble Beach property was listed for sale and/or lease with other real estate brokers in the Pebble Beach area.
Prior to 1969 or 1970 a property owner desiring to sell his property would supply the company with the pertinent information which was utilized in the preparation of a property listing form. These forms were used by the company's salesmen and were in the nature of informal agreements, remaining in effect until notice of cancellation was given by*59 the property owner. The property listing forms relative to the Pebble Beach property contained the following information:
*36 (a) The form dated December 15, 1951, states that the Pebble Beach house was occupied by the owner at times; that the key was with Winslow; that the selling price including furnishings was $ 55,000; and that the house was well furnished. The form contains no rental information. However, it was not the company's practice to put rental information on these forms.
(b) The form dated August 11, 1965, states that the Pebble Beach house was occupied by the owner at times; that Winslow no longer possessed a key thereto; that the selling price was $ 65,000 unfurnished or $ 75,000 furnished; that the rental price was $ 400 per month; that the Pebble Beach house was well furnished; and that it was taken off the market on September 6, 1966.
(c) The form dated December 10, 1969, states that the Pebble Beach house was occupied by the owner at intervals and that the selling price was $ 85,000.
(d) The form dated August 18, 1972, states that the Pebble Beach house was occupied on weekends; that it could be seen only on weekends through petitioner's son, Gorham Knowles*60 (hereinafter Knowles); and that the selling price was $ 95,000. 1 The information contained in the aforenoted forms was supplied by either petitioner or Knowles.
The Pebble Beach property was also intermittently listed for rent with the company during the years 1951 through 1972. However, the rental market in Pebble Beach was limited, and the company did not pursue an active rental business. It did not advertise rentals in newspapers and, in accordance with its policy of discouraging signs, placed no "for rent" or "for sale" signs on the Pebble Beach property. Had petitioner requested such signs the company would have complied but petitioner never tendered such a request nor did she make advertising efforts on her own behalf.
Petitioner planned to rent the Pebble Beach house furnished but upon selling the house in 1972, decided to retain the furniture. She then disposed of the furnishings*61 as follows: a portion thereof was given to charity; another portion was given to petitioner's goddaughter; and the remainder was given to Knowles and is presently kept in his San Francisco and Pebble Beach homes. The latter, which he purchased in 1972, is adjacent *37 to the Pebble Beach property at issue. He currently visits there approximately twice per month.
The furnishings in the Pebble Beach house included antiques and ashtrays which, along with approximately 10 to 12 bottles of liquor, were stolen in January 1971. This was one of six occasions on which the Pebble Beach house had been burglarized. These burglaries motivated Knowles to repossess the house keys from the real estate agents and to install a burglar alarm. Consequently, after either 1968 or 1969 no real estate agent possessed a key to the Pebble Beach house.
Until the actual sale of the Pebble Beach property, petitioner received no offers to either sell or rent the property. Winslow advised Knowles that no such offers had been forthcoming because the Pebble Beach house had electric heat, contained only two baths for three bedrooms, had no bathtubs, and lacked an individual dining room. Petitioner took*62 no action to remedy these deficiencies. However, any corrective action would have entailed considerable expense.
During the years in issue Knowles generally handled petitioner's affairs, including transactions concerning the Pebble Beach property. During these years he accompanied petitioner from Oakland to Pebble Beach three or four times annually since she suffered from cancer and was unable to negotiate the trip alone. On these occasions petitioner would insure that the garden was properly kept and Knowles would inform the real estate brokers that the Pebble Beach house was open. Knowles also traveled alone to Pebble Beach approximately once per month when requested by an agent to open the Pebble Beach house and made occasional weekend trips to visit friends living in Pebble Beach. During these weekends he stayed at his friends' home but would open the Pebble Beach house and inform the real estate agents that he had done so. Generally, these trips brought Knowles to Pebble Beach approximately twice per month during the years 1969, 1970, and 1971.
During the years in issue the utilities on the Pebble Beach property, to wit the electricity, telephone, and water, were operative. *63 The Pebble Beach house contained two telephones, and both petitioner and Knowles were listed in the Pebble Beach directory.
*38 In 1971, a home was being constructed at the rear of the Pebble Beach house. Knowles filed a complaint with the Del Monte Building Commission which resulted in the construction site being shifted.
The Pebble Beach security force comprises 42 patrolmen who provide around-the-clock security. House checks are made as a routine matter but should a person desire special checks during his absence from Pebble Beach he may make such a request. Petitioner requested such checks but at times failed to inform the security force that the house was occupied.
On her income tax returns for the years 1969, 1970, and 1971, petitioner claimed the following deductions:
| 1969 | 1970 | 1971 | |
| Depreciation (Pebble Beach house) | $ 1,056 | $ 1,056 | $ 1,056 |
| Depreciation 2 (furniture) | 1,731 | 441 | 0 |
| Expenses (Pebble Beach property) 3 | 2,389 | 2,079 | 3,148 |
In computing the depreciation deductions petitioner used the straight-line method. She elected a useful life of 33 years, listing as the cost basis $ 32,000 for the house and selected for the furniture a useful*64 life of 10 years, listing $ 17,315 as its cost basis. Depreciation allowed or allowable in prior years was taken into account for the years 1955 through 1968 for both the Pebble Beach house and furniture. The method and figures used by petitioner were correct.
Respondent disallowed the depreciation deductions for 1969, 1970, and 1971 asserting that petitioner had failed to establish that the Pebble Beach property was used in a trade or business or held for the production of income. Respondent similarly disallowed the aforementioned expense deductions except for real estate taxes paid. 4 He also determined that during the year 1969 petitioner received dividend income of $ 190 which petitioner had not included in her return for that year.
*65 OPINION
Petitioner, to be entitled to deductions for depreciation and maintenance expenses under sections 167(a)(2)5 and *39 212(2), 6 must demonstrate that the Pebble Beach property was "property held for the production of income" during the years 1969 through 1971. The quoted phrase in both sections arises from the Revenue Act of 1942, 56 Stat. 798, 819. Since both sections embody an identity of purpose, the phrase must be given the same construction in one as in the other. Commissioner v. Ridgway's Estate, 257">291 F. 2d 257, 259 (3d Cir. 1961), affg. 33 T.C. 1000">33 T.C. 1000 (1960); Frank A. Newcombe, 54 T.C. 1298 (1970).
*66 Petitioner advances the argument that prior to 1969 she had forever abandoned the Pebble Beach property as a secondary residence, and that under our decision in Mary Laughlin Robinson, 2 T.C. 305">2 T.C. 305 (1943), the property was converted to "property held for the production of income" by being listed for sale or rent. In support of her position, petitioner has also cited section 1.212-1(b) and (h), Income Tax Regs., which provides:
(b) The term "income" for the purpose of section 212 includes not merely income of the taxable year but also income which the taxpayer has realized in a prior taxable year or may realize in subsequent taxable years; and is not confined to recurring income but applies as well to gains from the disposition of property. * * * Similarly, ordinary and necessary expenses paid or incurred in the management, conservation, or maintenance of a building devoted to rental purposes are deductible notwithstanding that there is actually no income therefrom in the taxable year, and regardless of the manner in which or the purpose for which the property in question was acquired. Expenses paid or incurred in managing, conserving, or maintaining*67 property held for investment may be deductible under section 212 even though the property is not currently productive and there is no likelihood that the property will be sold at a profit or will otherwise be productive of income and even though the property is held merely to minimize a loss with respect thereto.
* * *
(h) Ordinary and necessary expenses paid or incurred in connection with the management, conservation, or maintenance of property held for use as a residence by the taxpayer are not deductible. However, ordinary and necessary expenses paid or incurred in connection with the management, conservation, or *40 maintenance of property held by the taxpayer as rental property are deductible even though such property was formerly held by the taxpayer for use as a home.
In connection therewith, she contends that the holding of the Pebble Beach property for rental purposes, and the taxable gain she realized from its disposition in 1972, render the Pebble Beach property, "property held for the production of income" irrespective of the fact that it was not "currently productive" during the years in issue.
Respondent does not agree. His primary argument is that petitioner*68 never abandoned the Pebble Beach property as a secondary residence and he urges that the evidence demonstrates the continued use of the Pebble Beach property as a weekend resort. His secondary argument is that even if the Pebble Beach property were abandoned, it was never converted to "property held for the production of income" since petitioner has never made a bona fide effort to rent it.
We find that the property was abandoned as a secondary residence prior to 1969. Although either petitioner or Knowles made semimonthly visits to the property during the years in issue, petitioner's evidence clearly demonstrates that such visits were made, at least primarily, for reasons related to the sale or rental of the property. Furthermore, respondent's evidence on this point is unconvincing. He would have us believe that the following facts warrant but one explanation -- that petitioner was continuing to use the house as a weekend resort. We disagree.
(a) Petitioner or Knowles visited the house approximately twice per month and the company's property listing forms stated that the house would be occupied by the owner "on weekends" or "at intervals." However, Winslow testified that these*69 recitations did not mean every weekend. Furthermore, we have already found that these visits were made primarily for the purpose of renting or selling the property.
(b) The utilities were operative during the years in issue. It is obvious that this was necessitated by the presence of an electrical burglar alarm system and the use of water by petitioner's gardener.
(c) The house contained two telephones, and both petitioner and Knowles were listed in the Pebble Beach directory. It seems clear that during the aforementioned visits petitioner or Knowles would desire to have a telephone available for use. They could not reasonably have been expected continuously to request that *41 the telephone company disconnect the telephones during their absence.
(d) The house was well furnished and always available for use by petitioner and her family. This fact simply does not support respondent's contention. Every abandoned residence is available for use by the owner until actual rental or sale. Merely because the Pebble Beach house was well furnished fails to prove that petitioner was utilizing it as a resort. The commonsense of the matter is that petitioner furnished the house as*70 a second residence. Upon abandonment, she already possessed a fully furnished residence in Oakland and merely left the furnishings of the Pebble Beach house intact.
(e) In 1972 Knowles purchased a residence adjacent to the Pebble Beach property. He currently travels there with the same frequency with which he visited the Pebble Beach property. We agree that this indicates use of the property as a resort by Knowles. It is not in itself, however, sufficient to prove respondent's position. After careful consideration of the evidence we conclude that petitioner had abandoned the Pebble Beach house as a secondary residence prior to 1969.
Proof of abandonment is, however, only the first hurdle petitioner must overcome to succeed in the instant case. Petitioner must also bear the burden of proving the property was being held for the production of income during the years in issue. Frederick H. Prince Trust, 35 T.C. 974">35 T.C. 974 (1961); Marjorie M. P. May, 35 T.C. 865">35 T.C. 865 (1961), affd. 299 F. 2d 725 (4th Cir. 1962). Put another way, petitioner must show that the property was being used for a profit-seeking purpose*71 during the years in question. Samuel Yanow, 444">44 T.C. 444 (1965), affd. 358 F. 2d 743 (3d Cir. 1966); cf. United States v. Gilmore, 372 U.S. 39">372 U.S. 39, 44-45 (1963). Carkhuff v. Commissioner, 425 F. 2d 1400 (6th Cir. 1970), affg. T.C. Memo. 1969-66. We conclude that petitioner has failed to make the requisite showing.
In cases of this type the critical inquiry is the intention of the taxpayer as gleaned from all of the facts and circumstances. William C. Horrmann, 17 T.C. 903">17 T.C. 903, 907 (1951); Samuel Yanow, supra at 452. Prior to 1969, petitioner had held the Pebble Beach property for 18 years without receiving any rental income. During this period all efforts to rent the property were handled exclusively by real estate agencies, primarily the company. However, Winslow, an agent for the company, testified that the *42 company never actively pursued a rental business and did not advertise rental properties in newspapers. She also testified that the company's rental activities did *72 not extend beyond keeping a list of rental properties for the convenience of property owners. Furthermore, after 1968 petitioner and Knowles alone possessed keys to the house which limited realtors in showing the house to prospective lessees. It seems clear to us that petitioner could not reasonably have expected that the identical efforts which had yet to produce any rental income would suddenly be productive during the years in issue. Still petitioner made no effort on her own behalf to rent the property. Thus, although the rental market in the Pebble Beach area was minimal, petitioner took less than minimal steps to rent the property. It cannot be gainsaid that during the years in issue petitioner had no reasonable expectation of realizing rental income from the property. Absent such expectation, the property was not held for the production of rental income. William K. Coors, 60 T.C. 368">60 T.C. 368, 410 (1973), affd. sub nom. Adolph Coors Co. v. Commissioner, 519 F. 2d 1280 (10th Cir. 1975); Alfred I. duPont Testamentary Trust, 62 T.C. 36">62 T.C. 36, 47 (1974), affd. in part and remanded on another issue*73 514 F.2d 917">514 F.2d 917 (5th Cir. 1975).
As noted above, petitioner has cited section 1.212-1(h), Income Tax Regs., in support of her position. However, a prerequisite to its applicability is a finding that the property was held as rental property. To the contrary, we have found that petitioner's rental efforts were spasmodic and halfhearted during the years in issue. We can only conclude that petitioner did not make a bona fide attempt to rent the property during these years. Hence, the aforenoted regulation is inapplicable to the instant case.
Petitioner's reliance on section 1.212-1(b), Income Tax Regs., is similarly misplaced since a determination that the property is "held for investment" is a prerequisite to its applicability. Frank A. Newcombe, supra at 1302. Since petitioner was not holding the property for rental income she must show that she was holding the property for postconversion appreciation to meet this condition. Frank A. Newcombe, supra.Petitioner has failed to do so, as the evidence clearly indicates a continuing attempt to dispose of the property from the time it was abandoned. *74 As we said in the Newcombe case:
The placing of the property on the market for immediate sale, at or shortly after the time of its abandonment as a residence, will ordinarily be strong *43 evidence that a taxpayer is not holding the property for postconversion appreciation in value. Under such circumstances, only a most exceptional situation will permit a finding that the statutory requirement has been satisfied. * * * [Frank A. Newcombe, supra at 1302.]
In effect petitioner was merely attempting to dispose of a personal residence, albeit a second home, and never held it to realize the gain from postconversion appreciation. Under such circumstances the property was not "held for the production of income" through realization of gain from the disposition of property.
Petitioner's reliance on Mary Laughlin Robinson, 2 T.C. 305">2 T.C. 305 (1943), is also without merit. In that case, the taxpayer abandoned her home and listed it for rent or for sale with two real estate firms which, in spite of diligent efforts, were able to rent only the garage. There we said:
In this matter the taxpayer no longer used the property as*75 a residence, and prior to the time the expenses were incurred the property had been appropriated to income-producing purposes by affirmative action, in that the property had been abandoned as a residence and had been listed for rent or for sale with two real estate firms, which had made diligent efforts and carried on numerous negotiations with prospective purchasers or tenants. Though such efforts were unavailing, for the firms were unable either to rent or sell the house, nevertheless, in our opinion the property was held for the production of income, within the meaning both of the statute and the regulation. [Mary Laughlin Robinson, supra at 307.]
The distinction between Robinson and the instant case is obvious. Unlike the taxpayer in Robinson, petitioner herein made no bona fide attempt to rent the property during the years in issue. Moreover, factual contexts of the two cases are markedly different. In Robinson the question before us was whether the taxpayer therein had ever abandoned her residence and appropriated it to income-producing purposes. We held that a bona fide listing "for rental" was sufficient to demonstrate such*76 appropriation. However, it does not follow that once a personal residence is converted to income-producing property it forever retains that status. It is in this context that the instant case arises. Assuming arguendo that prior to 1969, petitioner's property had been converted to "property held for the production of income," the lack of any income for 18 years and the lack of any serious rental effort during the years in issue preclude a finding that petitioner continued to hold the property for income-producing purposes. Cf. Gilbert Wilkes, 17 T.C. 865">17 T.C. 865 (1951).
*44 In this connection we reiterate that our inquiry in cases of the type involved herein must focus on the intention of the taxpayer. The standard set forth in Robinson is an objective test, necessitated by administrative convenience, for the determination of such intent. Cf. Warren Leslie, Sr., 6 T.C. 488">6 T.C. 488, 494 (1946). Hence a taxpayer who makes the showing essential to meet the Robinson standard will no longer hold the property for "income-producing purposes" where other circumstances unequivocally demonstrate a dissipation of his profit-seeking*77 motive. The instant case is such a situation. We hold that petitioner did not hold the Pebble Beach property for the production of income during the years 1969, 1970, and 1971.
We are aware that our holding, herein, is inconsistent with the decision in Hulet P. Smith, T.C. Memo. 1967-28, affd. per curiam 397 F. 2d 804 (9th Cir. 1968). But as we said in Frank A. Newcombe, supra at 1303:
But our statement in that case [Hulet P. Smith] that the issue was a "question" of "law" is belied by the affirmance by the Ninth Circuit on the ground that "we are not persuaded that the Tax Court's factual finding and its consequent conclusions are clearly wrong" and the statement that "the Government makes a strong case for reversal." See 397 F. 2d at 804. We therefore consider that case inapposite and of little precedential value.
Petitioner has presented no evidence whatsoever regarding the receipt of dividend income in 1969. Respondent's determination on this issue must stand. Welch v. Helvering, 290 U.S. 111">290 U.S. 111 (1933).
Decisions will be entered*78 for the respondent.
Footnotes
1. This listing form is that of the Del Monte Realty Co. which apparently was no longer a division of the company at that time.↩
2. Petitioner has conceded that she overstated the depreciation expense for furniture in the amount of $ 1,290 for 1969 and $ 441 for 1970.↩
3. The parties have stipulated that the amounts claimed on the returns were in fact paid by petitioner.↩
4. For the taxable year 1971 respondent also determined that petitioner was entitled to deduct $ 987.44 as real estate taxes paid rather than $ 962 as claimed per return.↩
5. All statutory references are to the Internal Revenue Code of 1954, as amended.
SEC. 167. DEPRECIATION.
(a) General Rule. -- There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear (including a reasonable allowance for obsolescence) -- * * *
(2) of property held for the production of income.↩
6. SEC. 212. EXPENSES FOR PRODUCTION OF INCOME.
In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year --
* * *
(2) for the management, conservation, or maintenance of property held for the production of income; or * * *↩