*174 Decision will be entered for the respondent.
1. Water in a well on petitioner's residential property became temporarily contaminated, so that it could not be used for four months. After the temporary condition disappeared, the use of water from the well for household purposes was resumed. Held, that the petitioner has failed to prove that he sustained a loss of property under section 23 (e) (3).
2. While the well was temporarily out of order, the petitioner had a new well drilled at a cost of $ 1,232. The well was not connected with a pump and was not used but was ready for use at any time upon the installation of a pump. Held, that the cost of drilling the new well is not deductible under section 23 (e) (3).
*1230 The respondent has determined a deficiency in income tax for 1946 in the amount of $ 384.25. The deficiency results for the most part from the disallowance by the respondent of a deduction in the amount of $ 1,518.40, which represents, chiefly, the cost of drilling an artesian well on residential property owned by the petitioner. The petitioner claims deduction for an alleged casualty loss under section 23 (e) (3) of the Internal Revenue Code.
The petitioner filed his return for 1946 with the collector for the district of Massachusetts.
FINDINGS OF FACT.
The facts which have been stipulated are found as facts.
During the taxable year 1946, the petitioner resided in Dover, Massachusetts, with his wife and children. He was engaged in the real estate business. The petitioner owned the property where he and his family lived. It was purchased in 1945. The petitioner paid $ 8,000 for the property and expended about $ 5,000 in 1946 for remodeling buildings on*176 the property. The value of the property as of January 1, 1946, according to the tax assessment roll of the town of Dover was as follows: Land, $ 350; house and barn, $ 2,500; garage, $ 150; total $ 3,000. On January 1, 1947, the town officials valued the property for tax purposes, as follows: Land, $ 350; house and barn, $ 3,500; garage, $ 150; pump outfit, $ 100; total $ 4,100.
The improvements which were located on the property in 1945, when it was purchased, included an artesian well and two cesspools, both of which were connected to the house in which the petitioner lived. In May of 1946, the petitioner hired a contractor to clean the cesspools. One of the cesspools was located about 58 feet from the *1231 well. The contractor pumped out both cesspools, and with the permission of the petitioner, he put some cleaning material, which he called a "solvent," in them. He refused to tell the petitioner what material he put in the cesspools. The contractor did not make any repairs of the cesspools, and he did not do any work on the old well.
The well provided the water supply for petitioner's house. It was a tubular, "driven" well about 100 feet deep. There was no pipe *177 in the well below an eight-inch tube and pipe at the top of the well. Four or five weeks after the cesspools were cleaned, the well water turned a dark brown color, smelled of sewage, and became unfit for consumption. The petitioner sent samples of the well water to a Boston firm of chemists and engineers for analysis to determine the cause of the color and odor of the water in May, June, and July of 1946. The concern gave the petitioner written reports in May, June, and July of the analyses which its chemists made of the samples of the well water. The May report stated, inter alia, that the odor was that of musty earth; that chlorides, lime, and sulphates were present in the water in abnormal amounts; and that in the opinion of the analyst some alkaline solution had found its way into the well and had brought with it a large amount of organic coloring matter from the soil. The June report gave the results of a bacteriological examination of the well water and stated, in part, that the analysis showed "gross contamination of the water by sewage"; that the high alkalinity indicated the presence of a large amount of sodium or potassium bicarbonate which was probably part of *178 the material added to the cesspool; that the contents of the cesspool were evidently "leaching into the well"; that there was indication of cesspool drainage; and that the water was unfit for domestic use. Another report was given to the petitioner by the same concern in July of 1946 on another bacteriological examination of the well water which concluded that the water was badly polluted and should not be used for drinking water.
The petitioner and his family stopped using the water from the old well after the receipt of the report which was made on June 4, 1946, and obtained water for drinking and bathing purposes from a store which was located one-third of a mile away. This water was carried to petitioner's house from about June 4, 1946, until about October 25, 1946. The petitioner expended $ 286.40 for the water and cartage, and for other costs during the above period of about four and one-half months.
In October of 1946 the petitioner sent samples of the water from the old well to the Massachusetts Department of Public Health, and it sent a written report of its analysis of the water to the petitioner on October 24, 1946. The report stated that the analysis showed that the*179 water was then free from bacteria characteristic of pollution and was *1232 safe for drinking. The Department advised the petitioner that if the old well should be continued in use, a water-tight cover should be provided and the ground about it should be graded to divert surface drainage from its vicinity. The petitioner, thereafter, resumed using water from the old well, and he has continuously used the old well as the sole source of water for his house for all purposes since about October 25, 1946, until the present time, a period of about four years.
However, prior to October 25, 1946, the petitioner decided to provide his house with a new source of water, and he engaged an artesian well driller named Harry MacTavish to drill a new well on the side of his house which was opposite to the old well. MacTavish finished the well in October of 1946. He drilled a well 176 feet deep, and charged $ 7 per foot for his work, or a total of $ 1,232, which the petitioner paid in 1946. After the new well was completed, there remained to be done the additional work of connecting a pump to the new well, and of connecting the new well to the plumbing system of the house. The cost of this*180 work would have been between four and five hundred dollars. The petitioner decided not to incur the additional expense and, up to the time of the trial of this proceeding, he had not had the new well connected to his house.
The use of the old well was not resumed until after the new well was drilled, but the use was resumed in October of 1946 at about the same time that the drilling of the new well was completed.
At the time of the trial of this proceeding, the petitioner either had decided or had come close to reaching a decision to start using the new well because the "water table" in the area had been going down, and in order to obtain more water from the old well, to meet increased household needs, the installation of a new deep well pump on the old well at a cost of between four and five hundred dollars would be necessary. The petitioner believed that it would be preferable to apply such expenditure of money to the installation of a deep well pump on the new well, and to connect the new well to his house, and thereby to have two well systems for the household water supply. The old well has a shallow well pump. As the "water table" drops lower, if it continues to do so, the*181 petitioner will obtain less water from the old well. The need for water has increased in petitioner's household, and the new well can be used to satisfy the need for increased supplies of water.
The petitioner deducted $ 1,518.40 in his income tax return for 1946 as a "casualty loss." The respondent disallowed the deduction.
Ultimate Findings of Fact.
The petitioner did not sustain a loss of property during 1946.
The new well which was drilled at a cost of $ 1,232 was at all times available for use upon the installation of a pump and other necessary *1233 connections. The expenditure of $ 1,232 for the new well does not represent a loss.
OPINION.
The petitioner seeks to invoke the benefit of section 23 (e) (3) of the Internal Revenue Code. 1
*182 The statute requires that if there is a casualty, a loss of property must result, and in order to obtain a casualty loss deduction, the taxpayer must establish the amount of the loss sustained. Under sections 29.23 (e)-1 and 29.23 (i)-1 of Regulations 111, a loss must be evidenced by a completed transaction, and the basis for determining a loss under section 23 (e) is the same as is provided by section 113 of the Code. It has been held that section 23 (e) (3) cannot be applied if there is no loss of property of a character which permits definite ascertainment and measurement in terms of money -- see Anne B. Richardson, 1 B. T. A. 576, where a loss was denied a taxpayer who claimed that as a result of a storm the value of property was less -- and where there is no "difference" between the adjusted basis of property, or value of property before a "casualty," and the value of the same property afterward, Helvering v. Owens, 305 U.S. 468">305 U.S. 468. Also, under section 23 (e) there must be sustaining of a loss. See XV-1 C. B., pages 115, 117, G. C. M. 16255.
Assuming, but not deciding, that some event*183 occurred in 1946 which comes within the meaning of the term "casualty" in section 23 (e) (3), we are unable to find that the petitioner sustained any loss during the taxable year in terms of a change in the value of his property. A temporary condition, which lasted about four months and which affected the water in the old well, developed, the cause of which is not entirely clear. But, before the end of the year, the well water cleared and was consumable, and the petitioner resumed the use thereof in his house.
The petitioner's chief contention is that the cost of drilling a new well, $ 1,232, is deductible. This contention is wholly without merit. There was no injury per se to the old well; only the water which came to it was temporarily contaminated. The old well has continued to serve its purpose until the present time. The amount of $ 1,232 which the petitioner desires to deduct was not expended in making repairs *1234 of the old well. It was expended in drilling a new well. The expenditure created an additional utility which was an asset. The value of the residential property was enhanced by the addition of a second well; or, at the least, the drilling of*184 a new and better well cannot be said to have diminished in any degree the value of the property. The new well was available for use at any time the petitioner desired to install a pump and make other connections, and he has testified that he intends to make use of the new well eventually. It is held that the expenditure of $ 1,232 does not represent a loss under section 23 (e) (3). Helvering v. Owens, supra.
The balance of the total expenditure, $ 286.40, was the cost of obtaining water during the four months' period when the old well did not provide pure water. This expenditure does not represent a loss in the value of the petitioner's property. It represents only what it cost the petitioner to obtain water while the old well was out of order. Section 23 (e) (3) allows deduction only for the loss of property, and in our opinion the expenditure in question does not come within the scope of the section. The petitioner has not introduced evidence which shows the amount of any loss of property. It is held that a deduction in the amount of $ 286.40 is not allowable under section 23 (e) (3).
Decision will be entered for the respondent.
Footnotes
1. SEC. 23. DEDUCTIONS FROM GROSS INCOME.
In computing net income there shall be allowed as deductions:
* * * *
(e) Losses by Individuals. -- In the case of an individual, losses sustained during the taxable year and not compensated for by insurance or otherwise --
* * * *
(3) of property not connected with the trade or business, if the loss arises from fires, storms, shipwreck, or other casualty, or from theft. No loss shall be allowed as a deduction under this paragraph if at the time of the filing of the return such loss has been claimed as a deduction for estate tax purposes in the estate tax return.↩