*47 Decision will be entered for the respondent.
Deduction -- Depreciation -- Basis -- War Loss. -- An adjustment of the basis for depreciation of property on account of a war loss in 1941 is mandatory under section 127 (a) (2), I. R. C., and no deduction for depreciation of the property is allowable thereafter unless and until the basis of the property is restored through recoveries at or after the end of the war. Abraham Albert Andriesse, 12 T. C. 907, followed.
*705 The Commissioner determined a deficiency of $ 9,344.38 in the income tax of the petitioners for 1944. The issue for decision is whether*48 the Commissioner erred in disallowing a deduction of $ 20,000 claimed as depreciation on buildings in Shanghai, China, owned by the taxpayer. The explanation given by the Commissioner in disallowing the deduction is as follows:
Depreciation claimed on buildings in Shanghai disallowed. Basis of property for depreciation purposes, and equity of rate used not substantiated. Furthermore, it is considered that the taxpayer has been automatically divested of title to this property in a prior year by virtue of Section 127 (a) (2) of the I. R. C. (War Loss Provisions).
FINDINGS OF FACT.
The petitioners are husband and wife, residing in New Rochelle, New York. They filed their return for 1944 with the collector of internal revenue for the third district of New York. The husband will be referred to hereinafter as the petitioner.
The petitioner was born in Iraq in 1897 and was a citizen of that country until March 4, 1946, when he became a citizen of the United States through naturalization. He was a resident of the United States at all times material hereto.
The petitioner acquired vacant land at Dalny and Ward Roads in Shanghai, China, during 1924. About 198 buildings, shops, and houses*49 were erected on the property in 1925. The cost to the petitioner of the depreciable improvements, stated in American currency, was about $ 188,750. These depreciable properties, constructed of brick exterior and wood interior, except for cement fireproofed kitchens, had useful lives of about 40 years, beginning in 1925.
The petitioner acquired land and buildings at Yates Road in Shanghai, China, in 1928. There were about 160 shops and houses on the property. The portion of the cost allocable to the depreciable *706 improvements, stated in United States currency, was about $ 285,000. These buildings, constructed of brick exterior and stucco facing were about 10 years old in 1928 and had a future useful life of about 30 years.
The petitioner received rents from the properties prior to the Japanese invasion of Shanghai on December 8, 1941. Thereafter and during the taxable year the petitioner received no rents from the properties, which had been taken over by the Japanese invading forces. The properties were not destroyed during the war. The petitioner again obtained possession of the properties in 1945 and began to receive some rents from them.
OPINION.
The respondent contends*50 in his brief that the petitioner has failed to show ownership of the properties, but that question is not fairly or properly in issue. Furthermore, the evidence shows that the petitioner was the owner of the properties, as the respondent must have concluded in determining the deficiencies.
The evidence in regard to the cost of the properties and their probable useful lives is not as clear, complete, or convincing as it might be, but findings have been made as favorable to the petitioner as the evidence permits.
One of the contentions made by the respondent is that the petitioner may not take depreciation on his Shanghai properties for 1944 in view of the fact that his entire basis for those properties was deductible as a loss in 1941 under section 127 (a) (2), and thereafter he had no basis for depreciation. The petitioner concedes the correctness of this contention if he had no election under section 127 (a) (2). The scheme of Congress in enacting section 127 was to make sure that a taxpayer would have a deductible loss when war was declared or the enemy invaded a country in which the taxpayer owned property and thereafter the property would, if recovered, come into income and*51 acquire a new basis, but only to the extent that the original loss deduction had had tax benefits. This Court, in another case which is not distinguishable in principle from this one, held that the word "deemed," as used in section 127 (a) (2), created a conclusive presumption of loss on the date war with the enemy country was declared by the United States, and Congress did not intend to permit a taxpayer an election to claim the loss under section 23 (e) (3) in later years when actual destruction or seizure occurred. Abraham Albert Andriesse, 12 T. C. 907. The only difference between that case and the present case is that the present petitioner is claiming a right to a deduction for depreciation under section 23 (l) instead of loss under section 23 (e) (3). This difference does not distinguish *707 the Andriesse case as an authority for the purpose of this case. The basis for depreciation is the same as the basis for gain or loss. Secs. 23 (n), 114 (a), 113 (b). Each is reduced or wiped out by a deduction for loss. The war loss under section 127 (a) (2) wipes out that basis. A taxpayer has no election under section 127 (a) (2), which*52 allows him to deduct his basis for the property as a loss at the time of the declaration of war, and, having been allowed to recover his basis in that way, he can not recover it later, either as a loss or through depreciation. Other possible grounds for the Commissioner's determination do not need to be discussed.
Decision will be entered for the respondent.