*171 Decision will be entered under Rule 50.
Petitioner lost his textile plant and the realty in Vienna in 1938 when it was confiscated under Nazi decree during the Anschluss. In 1945, the plant was looted at various times and machinery and merchandise were taken. In 1947, petitioner instituted legal proceedings before the Austrian Restitution Commission to have title to the plant restored. In May 1949, a decree was entered directing the person who had obtained title to the plant to restore it to petitioner in the same condition as it had been on July 31, 1946. Final decree was entered in June 1949, and on September 23, 1949, title to the realty was recorded in the name of the firm of Bernhard Altmann, Ltd. Held, petitioner has failed to prove that under Austrian law the effect of the decree of the Austrian Restitution Court in May 1949 restored petitioner's title to the realty, plant, fixtures, and properties ab initio to March 1938; that petitioner has failed to prove that he owned the realty and plant in question in 1945, as well as the property which was taken from the plant in 1945; and that, therefore, a claimed loss deduction of $ 313,838.87 from 1945 income is *172 not allowable under either section 23 (e), or section 117 (j) of the Code.
*236 The respondent has determined a deficiency in income tax for 1945 in the amount of $ 128,324.67. Respondent disallowed a loss deduction taken in the return in the amount of $ 150,000. Petitioner has made claim for deduction in an increased amount, and he now claims that he sustained in 1945 losses in the aggregate amount of $ 313,838.37, resulting from theft and confiscation of property in 1945, located in Vienna, Austria. Petitioner claims that he is entitled to loss deductions under either section 23 (e), or section 117 (j) of the Code.
*237 The principal issue is whether petitioner was the owner, in 1945, of the property in question. If it is held that petitioner was the owner of the property in question, further issues must be decided which relate to the amount of the loss which is deductible.
FINDINGS OF FACT.
The facts which have been stipulated are found, and the stipulation is incorporated herein by reference.
Petitioner came to the United States in 1941*174 as an Austrian refugee and he has resided here continuously since then. He became an American citizen in May 1948. In 1945 he resided in New York and his income was derived principally from executive salaries and earnings of capital invested in the textile manufacturing and distributing business. He filed his Federal income tax return for 1945 with the collector for the third district of New York.
In his 1945 income tax return, petitioner took a deduction for a loss from casualty or theft of "merchandise and machinery stolen from plant in Vienna by Russians during the occupation of that city -- estimated -- $ 150,000." The phrase, "plant in Vienna," means a textile manufacturing plant, hereinafter referred to as Texplant, which petitioner built in 1922, and which he operated until March 13, 1938, manufacturing hosiery, sweaters, and other textiles. In his return for 1945, petitioner did not report any income from the operations of Texplant, and he did not claim any losses or deductions in connection with the operation of Texplant other than the alleged $ 150,000 casualty loss which is at issue in this proceeding.
In his income tax return for 1950 petitioner, with respect to Texplant, *175 reported deferable income for the years 1946 to 1949, inclusive, pursuant to mimeograph 6475, 1950-1 C. B. 50. He did not report deferable income from the operation of Texplant for 1945.
On or about November 24, 1941, petitioner, as a national of a foreign country acquiring residence in the United States after a particular date, executed Report Form TFR-300, Series A, purporting to be an inventory of certain property owned by him. He did not make any reference in the Report Form to Texplant property, or to any portion thereof. The petitioner filed Form TFR-300 with the Secretary of the Treasury of the United States whose function with respect to alien property was subsequently taken over by the United States Department of Justice.
Petitioner has been engaged in the business of manufacturing textiles since 1902. When this proceeding was tried he owned textile knitting plants in Texas, United States; Bradford, England; and Vienna, Austria.
*238 On March 13, 1938, in an act of aggression known as the Anschluss, Austria was occupied and annexed by Hitler and German troops. Petitioner is of the Jewish faith. He departed from Austria in 1938, 6 hours*176 before the arrival of the German troops, crossing over the border into Hungary. At that time he left in Austria certain of his property including Texplant.
The petitioner's property in Austria was confiscated under the Nazi decree issued in August 1938, confiscating Jewish property in Austria. The property which was confiscated included the realty on which Texplant is located. Two German citizens, Kurt Bagusat and Alfred Boehme, were placed in charge of Texplant in 1938, and they were instructed by the Nazis to operate Texplant in furtherance of the best interests of the Reich. In the discharge of such functions, Bagusat and Boehme were known as "Aryanizers". Boehme left Texplant sometime in 1941.
Texplant at all times here material, with such variations as are hereinafter noted, consisted of several parcels of real estate, the factory buildings erected thereon, and the machinery, equipment, materials, and merchandise which were employed in the operation of the plant.
Under Austrian law, with exceptions not here applicable, title to real estate may not effectively be transferred without making an appropriate entry in the official, Austrian real estate register known as the Grundbuch. *177 1 Entries were made in the official Grundbuch, with respect to the Texplant realty, insofar as here material, as are set forth hereinafter in the English translation of the entries. These entries show that on August 23, 1938, the right of ownership of Texplant was recorded in favor of the State of Austria; that on January 29, 1942, the right of ownership was recorded in favor of the German Reich; that on July 4, 1942, the right of ownership was recorded in favor of Bagusat; that on March 27, 1946, there was recorded the appointment of a public administrator of Texplant; and that on September 23, 1949, entry was made that on the basis of the decision of May 20, 1949, of the Restitution Commission of Vienna, ownership was entered for the firm of Bernhard Altmann, Ltd. The material entries relating to Texplant, in the Grundbuch, are as follows:
| Date | Entry |
| Not given | Ownership entered in favor of Bernhard Altmann sole |
| owner (purchase contract of November 30, 1921). | |
| August 23, 1938 | Pursuant to the decree of the Secret State Police (Gestapo |
| Main Office, Vienna, of June 13, 1938, II E-B | |
| #IX 204/38 the right of ownership is entered in favor | |
| of the State of Austria. | |
| January 29, 1942 | Pursuant to Article 12, Section 1 of the 1st Ordinance |
| for the Carrying out of the Ostmark law of June 10, | |
| 1939, (Law Gazette of the German Reich I, p. 995) | |
| and pursuant to Article 2, Section 3 of the 9th Ordinance | |
| for the Carrying Out of the Ostmark Law of | |
| March 23, 1940 (Law Gazette of the German Reich I, | |
| p. 545) the right of ownership is entered in favor of | |
| the German Reich (Reich Finance Department). | |
| July 4, 1942 | Pursuant to the purchase contract of April 27, 1942 the |
| right of ownership is incorporated in favor of the firm | |
| of Wiener Wollwaren-Werke Kurt Bagusat. | |
| March 27, 1946 | Pursuant to the two decisions of the State Office for |
| Industry, Commerce, Trade and Traffic, both dated | |
| June 4, 1945, unnumbered, the appointment of a public | |
| administrator and of a public substitute administrator | |
| is entered in connection with this realty. | |
| September 8, 1949 | On the strength of the decision of Federal Ministry for |
| the Preservation of Property and Economic Planning | |
| of July 4, 1949, Number 106,001-6/49 the O Z 5 entry | |
| has been deleted. (Notice of appointment of Public | |
| Administrator -- March 27, 1946). | |
| September 23, 1949 | On the strength of the partial decision of the Restitution |
| Commission at the Court for ZRS Vienna of May | |
| 20, 1949, 52 RK 184/47-23 and the notarial corporate | |
| charter of June 30, 1949, together with the power of | |
| attorney attached hereto of June 17, 1949, the ownership | |
| of property is entered for the firm of Bernhard | |
| Altmann, Ltd. |
*239 Bagusat entered into a contract with the German Reich for the purchase of Texplant on April 27, 1942. He paid 888,000 Reichsmarks for the realty and plant. He paid the consideration for the purchase by the assumption of debts incurred by the Reich in the amount of 888,000 Reichsmarks. On July 4, 1942, Bagusat's purchase was recorded in the Grundbuch as has been set forth above. On October 14, 1944, an entry was made in the Grundbuch indicating the existence of mortgages on Texplant in favor of three relatives of Bagusat. Other liens which had been recorded in the Grundbuch against Texplant in 1942 were canceled by appropriate entries in 1942 and 1944.
From the time Texplant was abandoned by petitioner on March 13, 1938, until on or about April 7, 1945, the factory was in active operation. Throughout*179 this period production consisted mainly of the manufacture of knitwear and women's ready-made clothes. During the latter part of 1944 and the early part of 1945 some war materials were produced at Texplant. As of a short time prior to April 1, 1945, about 500 persons were employed at Texplant. During the time that Texplant was being operated by Bagusat, machinery was installed in the plant which had not been there as of March 13, 1938.
*240 In April 1945, Russian troops captured Vienna. On April 5, 1945, Bagusat fled from Vienna. On or about April 9, 1945, the German troops withdrew from the Fifth District of Vienna, in which Texplant is located. As a result of heavy fighting in the vicinity, Texplant closed down completely on April 7, 1945, and it was deserted after April 7 by all but the families of a few employees who occupied living quarters which were provided in one of the factory buildings.
On or about April 10, 1945, Josef Kadlec, who had been employed at Texplant since July 11, 1922, and had been its technical manager at all times since 1938, revisited the plant. He noted that substantial quantities of merchandise were being looted from the premises by the civilian*180 population and he requested a Russian officer to prevent further pilfering. Sentries were immediately posted and further looting was prevented. On April 11, 1945, Waldemar Benedict, an employee of Texplant since 1941, revisited the factory. On or about that date, Benedict and Kadlec agreed to take steps to recruit the former employees of Texplant and to resume manufacturing operations. They consulted the police commissioner for the Fifth District of Vienna, in which Texplant was located, and were advised to arrange a meeting of employees for the purpose of electing workers' representatives. On May 9, 1945, a meeting of several hundred employees was held at the office of the police commissioner, and eleven workers' representatives were elected. These representatives decided that Benedict and Kadlec should direct the administration of Texplant, and the names of Benedict and Kadlec were formally submitted to the District Chairman, the Austrian Department of Industry and Commerce, the Association of Textile Manufacturers, and a local labor union. In letters sent to the Department of Industry and Commerce and to the District Chairman it was stated that appointment of Benedict and*181 Kadlec as public administrators was proposed "until the return of the lawful proprietor Bernhard Altmann."
On June 4, 1945, pursuant to the provisions of the Austrian law concerning the appointment of public administrators, 2*182 Benedict and Kadlec were appointed public administrator and deputy public administrator, respectively, by the Ministry of Commerce. Their appointments were not recorded in the Grundbuch until March 27, 1946. They continued to act in these capacities until July 4, 1949. Under Austrian law the appointment of public administrators has *241 no effect on the title of the property being administered. 3 Public administrators are directly answerable to the Austrian Government and are required to submit semiannual reports to the Ministry of Trade and Commerce. Receipts of the business during the period of public administration are retained in the business until permanent ownership is determined at which time an accounting is made by the administrators, who incur no personal liability for losses incurred during the period of administration so long as they exercise the diligence of a prudent merchant. 4
On or about May 15, 1945, about 70 sewing machines and about 16 automatic knitters used in the manufacturing of stockings were taken from Texplant by the Russians. By the early part of June 1945, Texplant was back in operation. Between June 15 and June 25, 1945, the Russians took additional machinery from the plant. During this period employees were excluded from the premises. As the machinery being removed was heavy, 10 days were required for dismantling and packing. The Russians took about 2,000 dozen woolen stockings which were used for packing machinery. Sometime thereafter an undetermined sum of Austrian Schillings was received by Texplant from the Russians. Benedict and Kadlec protested to the Association of Textile Manufacturers and to the Ministry of Commerce against the Russians' seizure of machinery and merchandise hereinabove mentioned. They were advised by both organizations that nothing could be done about the matter. Benedict and Kadlec were requested*183 by Russian officers to authorize the seizure of machinery in writing. Both refused to do so. In July 1945, the Russian troops withdrew from the Fifth District of Vienna. It became, later, a part of the British zone of occupation.
After the petitioner left Austria in 1938, he was entirely out of communication with Texplant and with the persons in control thereof until approximately October 1945, when letters passed between petitioner and Benedict and Kadlec. Petitioner advised Benedict and Kadlec that he desired to have production in Texplant begin again; and he requested the making of samples with the idea of selling products in the United States. Petitioner was advised that Texplant lacked the necessary raw materials for production and, also, that employees and their families were greatly in need of food supplies. In 1946 petitioner began sending food supplies and materials to Vienna.
Sometime in 1947 petitioner, acting through a Viennese attorney, commenced an action before the Austrian Restitution Commission 5 for the purpose of having title to Texplant restored to him and of *242 recovering from Bagusat damages for alleged losses sustained by Texplant while it was *184 in the possession of Bagusat. This proceeding was brought pursuant to the provisions of the Austrian Third Restitution Law enacted February 6, 1947, by the Austrian National Council. This statute is also known in the English translation as Federal Law, dated 6th February 1947, concerning the Nullity of Acts of Dispossession of Property. It comprises 31 principal articles. The English translation is incorporated herein by this reference. Particularly pertinent articles thereof are as follows:
Article 1.
Section 1: The subject matter of the present Federal Law is the property of which, during the German occupation of Austria, the owner (beneficiary) -- hereinafter referred to as the "owner" -- has been dispossessed in connection with the accession to power of National-Socialism, either arbitrarily or in virtue of laws or of other measures, especially by law-business or by any other legal transaction.
Article 2.
Section 1: Dispossession of property within the meaning of #1, subpara (I) shall, in particular, be deemed to have taken place where the owner was liable to persecution by National-Socialism on political grounds, and the transferee fails to show that the transfer*185 would have taken place anyhow, independently of the accession to power of National-Socialism.
Article 3.
Section 1: Acts of dispossession of property (#1, subpara (1) are null and void. Except as otherwise provided in the present Federal Law the rules of the civil law, especially those regarding the nullity of contracts because of unjust and substantial intimidation shall apply.
Article 6.
Section 3: Without prejudice to the provisions of #5, subpara (2), the dispossessed property shall be restored at least to the extent and in the condition in which it was on the 31st July 1946.
Article 15.
Section 1: Restitution Board shall have exclusive jurisdiction to decide on any claims arising from anullity [sic] of acts of dispossession of property under the present Federal Law, including indemnity claims between several transferees.
Section 2: A Restitution Board shall be established at each of the provincial Courts in charge of the administration of justice in civil matters. The territorial jurisdiction of such Board shall cover the Federal Province in which the Provincial Court is situated. For Vienna, Lower Austria and the Burgenland the Board shall be established*186 in Vienna Provincial Civil Court. The jurisdiction of the Board established at the North Provincial Court shall coincide with the territorial jurisdiction of the said Court.
*243 Section 3: Appelate [sic] jurisdiction shall be exercised by Superior Restitution Boards which shall be established at each of the Superior Provincial Courts of Justice. The territorial jurisdiction of the said Board shall coincide with that of the Provincial Superior Court of Justice at which they are established.
Section 4: On a second appeal the Supreme Restitution Board of the Supreme Court of Justice shall decide.
In January 1949, petitioner returned to Vienna for the first time since his flight in 1938. His restitution action was then still pending. Petitioner was very anxious to have all clouds on his title to the Texplant property removed as quickly as possible. He therefore instructed his attorney in Vienna to waive the claim for damages against Bagusat so that the desired*187 judgment respecting title could be expedited. On May 20, 1949, the Restitution Board in Vienna entered an interlocutory decree designated 52 RK 184/47/20. The translation of this interlocutory decree is incorporated herein by this reference, and the decree will hereinafter be referred to as "the part decision." Pursuant to the part decision Bagusat was directed to restore, -- "restitute" --, Texplant to petitioner, together with all interior equipment, machines, and stores, in the same condition as it had been in on July 31, 1946. Bagusat was further ordered to effect a transfer of the title to the Texplant realty by appropriate entries in the Grundbuch; and to return the property to the petitioner in the same condition as it existed on July 31, 1946. Finally, the part decision directed Bagusat to cancel his name from the commercial register as owner of Texplant, to reenter the name of petitioner as sole proprietor, and to take all other necessary steps in connection with transfer of ownership. The part decision provided that upon Bagusat's failure to comply within a specified time the decree would become self-executing. Pending final settlement of the case, however, petitioner's*188 authority with respect to Texplant was limited to that of a public administrator.
On June 29, 1949, a final decree was entered by the Restitution Board in Vienna, which decree is hereinafter referred to as the "final decision." The English translation of the final decision is incorporated herein by this reference. Among other things the final decision ordered the cancellation of all mortgages which Bagusat had placed upon Texplant in favor of members of his family. Petitioner's claim against Bagusat for damages was dismissed.
On July 4, 1949, the appointment of Benedict and Kadlec as public administrators of Texplant was rescinded and the public administration was withdrawn.
On August 9, 1949, the Restitution Commission vacated the limitation imposed upon petitioner restricting his authority over Texplant to that of a public administrator.
*244 After expiration of the time for taking an appeal from the part and final decisions petitioner applied to the Restitution Commission for a declaratory judgment which would in effect adjudge all title to Texplant, which had its origin in the 1938 confiscatory decree of the Gestapo, to be null and void ab initio. In a decision of *189 the Supreme Restitution Commission, dated March 11, 1950, designated and hereinafter referred to as Rkv 110/50, petitioner's appeal from denial of his motion for such declaratory judgment was dismissed. The English translation of Rkv 110/50 is incorporated herein by this reference. A portion of Rkv 110/50 is set forth in the margin. 6
*190 On July 26, 1946, the Government of Austria promulgated a new law on public administrators to replace the law rescinded on February 1, 1946. The law of July 26 was not retroactive, but persons appointed public administrators under the rescinded law were permitted to act until the effective date of the new law.
On January 5, 1943, the Allied Powers, including the United States and Russia, issued the so-called London Declaration against acts of Nazi dispossession whether in "the form of open looting or plunder, or of transactions apparently legal in the form, even when they purport to be involuntarily effected."
The London Declaration was a political declaration of intent which has not been carried out by the Government of Austria because of political and economic difficulties not here material.
At the time, on or about April 11, 1945, when Benedict and Kadlec conferred with regard to the future operations of Texplant, both had heard of the London Declaration and in reliance thereon intended to operate Texplant until such time as active control was resumed by petitioner. As of that time Benedict had neither met, spoken to, nor otherwise communicated with petitioner. Under Austrian*191 law neither the acts nor the intent of Benedict and Kadlec were effective either to extinguish the title of Bagusat or to restore to petitioner his earlier title.
*245 The actual fighting in Europe ended on May 7, 1945, with the surrender of Germany. No peace treaty has been signed with Germany to date. The United States never declared war on Austria.
Austria was occupied by the Allied Powers (the United States, the Union of Soviet Socialist Republics, France, and Great Britain), following the defeat of Germany. Each power occupied a separate zone, with Vienna being governed by the Joint Allied Commission, which supervises the acts of the Austrian Government. After the defeat of Germany, supreme legislative, judicial, and executive authority and powers within the territory occupied by the Allied Forces were vested in the Supreme Commander of such forces. On January 7, 1946, the Austrian Government was recognized by the United States, but the supervisory authority of the Allied Commission was not disturbed.
As the allied military forces took possession of Austrian territory during April and May of 1945, the allied military government issued, progressively, the so-called Ordinance*192 No. 4, entitled "Abrogation of Nazi Law" which became effective as of the date such areas became occupied by allied forces. Ordinance No. 4 specifically abrogated the law pursuant to which petitioner's Austrian property was confiscated. Ordinance No. 4 had only prospective effect.
Under Austrian law, Bagusat owned the title to Texplant from July 4, 1942, until September 23, 1949. On September 23, 1949, the title to Texplant became vested in Bernhard Altmann upon the recording of title to Texplant in the official record of titles, the Grundbuch. The entry, above described, recited that Texplant having been restored to petitioner pursuant to the part decision, title was entered for the firm of Bernhard Altmann, Ltd., at petitioner's request.
The cancellation of mortgages placed upon Texplant by Bagusat in 1942 was ordered by the final decision pursuant to the express provisions of Article 10 of the Third Restitution Law. 7
*193 Petitioner lost title to Texplant, the contents, and the realty in 1938.
The effect of the Third Restitution Law of February 6, 1947, and of the decrees entered in 1949 and 1950 in the proceeding instituted by the petitioner in 1947 under the Restitution Law, was to hold that the vesting of title to Texplant, the contents, and the realty in other persons than the petitioner in 1938 and thereafter, was voidable rather than void ab initio, so that the order in 1949 to restore the property to petitioner did not revest title in him retroactively to 1938, or to any other point of time before or during 1945.
*246 The provisions of Article 6 (3) of the Third Restitution Law and the part decision, to the effect that Texplant should be restored to petitioner to the same extent and in the same condition as it was in on July 31, 1946, did not, under Austrian law, have the effect of restoring title as of that date but merely fixed that date as a criterion in determining the quantum of the estate to be restored.
Title to Texplant, the realty, and the contents of the plant was not, under Austrian law, revested in petitioner at any time during, or prior to, 1945 by reason of the appointment*194 of public administrators, or the acts of petitioner, or his agents, or of any person purporting to act on his behalf.
Title to Texplant, the contents, and the realty were revested in petitioner after 1945, under the Restitution Law, the decrees entered in 1949 and 1950 in petitioner's suit, and applicable Austrian law, and petitioner was not the owner of the property at any time after August 1938, until 1949.
Petitioner did not own in 1945, under Austrian law, the machinery and merchandise in question, which were taken from Texplant in 1945. He did not sustain losses in 1945 of the property in question of the alleged value of $ 313,838.87.
OPINION.
The chief question is whether the petitioner was the owner of property in 1945 for which he now claims a loss deduction of $ 313,838.87. The loss is claimed under either section 23 (e) (1), or (3), or section 117 (j) of the Code. The applicable provisions of the Code are printed in the margin. 8
*195 *247 The petitioner contends that four classes of property located in Texplant in Vienna were taken or lost in 1945, and that he was, in law, the owner of the properties, so that he sustained the losses in question. The four classes of property and the amounts of the alleged losses are as follows:
| Class of property | Amount of loss |
| (a) Pre-1938 machinery allegedly taken by Russians in May, | |
| June, 1945 | $ 74,344.51 |
| (b) Machinery acquired after 1938 by Bagusat with funds of | |
| petitioner allegedly seized by Bagusat by Russians | |
| May, June, 1945 | 52,255.26 |
| (c) Merchandise in Texplant taken by Russian in 1945 | 20,000.00 |
| (d) Merchandise taken by civilians who looted the plant | |
| in 1945 | 167,239.10 |
| $ 313,838.87 |
Briefly, the petitioner contends that machinery and merchandise in the above amounts were located in Texplant in the spring of 1945, that they were stolen or confiscated by either the Russians who occupied Vienna, or by civilians, that he owned the properties, and that he was not compensated by insurance or otherwise. The petitioner lost Texplant in 1938 but those who had control of Texplant carried on manufacturing operations and made merchandise. *196 Petitioner contends that the records of Texplant contain information from which he can trace back the facts relating to the acquisition of the machinery in question, and the production of the merchandise in question. Upon alleged facts to the effect that the machinery and merchandise were part of the whole property referred to herein as Texplant, and that such machinery and equipment were located in Texplant before the alleged seizures and thefts in 1945, the petitioner devotes a major part of his argument to the proposition that he became revested, retroactively, with the title to Texplant, to the realty upon which it is located, to the fixtures and machinery in the plant, and to inventories of goods in the plant so that he was the owner throughout 1945, and, therefore, is entitled to make claim for loss deductions in 1945 for the purpose of his United States income tax liability. The petitioner makes other contentions which will be referred to hereinafter.
*248 The broad question whether petitioner owned Texplant and its contents in 1945 depends upon whether under Austrian law a revesting of title to the property in petitioner occurred, and whether under Austrian law the*197 revesting of title was retroactive to some point of time before or during 1945. The petitioner has the burden of proof under all issues presented in this proceeding, including the questions relating to Austrian law. Questions of foreign law are questions of fact to be proved by the taxpayer under such issue as is presented here. See: W. J. Burns, et al., 12 B. T. A. 1209, 1224; Columbian Carbon Co., 25 B. T. A. 456, 465; Morris, "Law and Fact," 55 Harv. L. Rev. 1303">55 Harv. L. Rev. 1303; 9 Wigmore on Evidence (3d ed.) par. 2572.
If the petitioner is unable to establish by competent proof that he owned the property in 1945 for which he claims loss deductions in 1945, it is unnecessary for us to consider other questions. Therefore, the first issue to be considered is the issue relating to ownership of properties under Austrian law.
The respondent contends under the chief issue that the petitioner, under Austrian law, did not own the property in question in 1945 at the time it was taken. He argues that the petitioner has failed to prove the requisite ownership. He claims that under Austrian law, Bagusat was the*198 owner of Texplant from the time he purchased it in 1942 until he was ordered to restore it to petitioner under the 1949 decrees. Briefly, the respondent's argument is as follows: That there can be no doubt that in 1938 petitioner lost all his Austrian property, a part of which he now claims he lost in 1945, and that petitioner's loss of property was effective and complete in the year 1938. The respondent points out that the petitioner himself represented in effect that he had abandoned the property, for, in inventorying all his assets wherever situated on Report Form TFR-300, Series A, filed with the United States Treasury Department on November 24, 1941, the petitioner did not report the property located in Austria. The respondent relies upon the rule that the transaction evidencing a loss is completed when property is seized, regardless of the prospects for a future recovery, citing United States v. S. S. White Dental Manufacturing Company of Pennsylvania, 274 U.S. 398">274 U.S. 398. Respondent points out that after Texplant had been confiscated in 1938, it was sold by the German Reich to Kurt Bagusat for 888,000 Reichsmarks, and he argues that under Austrian*199 law, Bagusat was the owner of the property during 1945. Under this argument, respondent relies upon the testimony of an expert on Austrian law, Dr. Steefel, whom respondent called as a witness in this proceeding. The respondent argues, further, that Bagusat did not lose ownership of the property in question until 1949 pursuant to the restitution decree.
*249 The evidence under the ownership issue consists chiefly of English translations of the Third Austrian Restitution Law, of selected excerpts taken from the Austrian Law on Public Administrators, of the Austrian Code of Commerce, of the Austrian Civil Code, of numerous decisions handed down by Austrian administrative agencies which are vested with the function of adjudicating rights and liabilities under the Third Restitution Law and related statutes, and the testimony of expert witnesses, who gave their opinions on questions of Austrian law and the effect of the decrees under the Restitution Law in the litigation instituted by petitioner in 1947. Petitioner called two expert witnesses and respondent called one expert witness. See Havana Electric Railway, Light & Power Co., 29 B. T. A. 1151.*200
The narrow question to be decided under the ownership issue is whether the several decrees, entered in 1949 by the Austrian Restitution Commission in the proceeding which petitioner instituted in 1947 under the provisions of the Third Restitution Law of February 6, 1947, had the effect, under Austrian law, of rendering the title of Bagusat, or any other person, to Texplant and to the realty, fixtures, machinery, merchandise, and other property comprising Texplant, void ab initio, or merely voidable.
After careful consideration of all of the evidence, we are of the opinion that, under Austrian law, the title to Texplant and to the property comprising Texplant which, between August 23, 1938, and September 23, 1949, was held successively by the State of Austria, the German Reich (Reich Finance Department), and Kurt Bagusat, was a voidable title which effectively cut off petitioner's right of ownership until 1949, when title was restored to petitioner by order in a judicial determination and by the recording of title in petitioner in the record of titles.
Texplant was taken away from petitioner pursuant to a confiscatory decree, dated June 13, 1938, which had the full force and effect*201 of an Austrian statute. The divestiture became effective as to both the real and personal property comprising Texplant when an appropriate entry was made in the Grundbuch under date of August 23, 1938. Under this entry, title was recorded in the name of the State of Austria. Upon the occurrence of this event, petitioner's loss of title to Texplant was complete and effective for income tax purposes. United States v. S. S. White Dental Manufacturing Company of Pennsylvania, supra.Pursuant to subsequent entries in the Grundbuch, title to Texplant was effectively transferred under Austrian law to the German Reich, and to Bagusat. Against this background the effect of the Third Restitution Law and the several decrees, entered pursuant thereto in the proceedings brought by petitioner, upon ownership of Texplant may be better understood.
*250 The Third Restitution Law provided that acts of dispossession of property perpetrated in Austria under German occupation are null and void. However, as stated in the decision of the Austrian Supreme Restitution Commission, herein referred to as Rkv 110/50, the nullity of such acts of dispossession is not*202 absolute but relative. We understand this to mean that titles acquired through these acts of dispossession are not void ab initio, as petitioner contends, but are voidable. This is made clear in several ways. First, title remains in the "wrongful dispossessor" or those holding title through him, unless and until an appropriate proceeding is brought by the dispossessed owner before the Restitution Commission. Second, the Restitution Commission is vested with discretion to determine ownership in each case brought before it, and, also, to decide claims for damages, mesne profits, and counterclaims for value added to property. When the Restitution Commission determines the various issues before it, it enters a decree which speaks prospectively and not retroactively.
The part and final decisions entered in petitioner's proceeding are illustrative of this fact. These decrees ordered Bagusat to restore Texplant to petitioner within a given time in the future and made no mention of any retroactive effect to be given to the decrees. Third, when petitioner sought a declaratory judgment for the purpose of having the title of Bagusat and others holding adversely to petitioner declared*203 void ab initio, this relief was denied. Finally, the Civil Code still being the law of the land, title was not restored to petitioner until an entry accomplishing that purpose was made in the Grundbuch. Our conclusions find support both in the testimony of Dr. Steefel, and in the numerous decisions and other authoritative sources of Austrian law to which we have been referred.
Dr. Steefel pointed out in his testimony that nothing in the Third Restitution Law or the part and final decrees speaks of retroactive effect. July 31, 1946, is referred to both in the Law and the part decree as the date as of which the quantum, extent, and condition of the property to be restored shall be determined. Clearly this does not mean that Bagusat shall not be deemed owner of Texplant after July 31, 1946, but rather that he is to restore to petitioner following entry of the part decree the same amount of property as that which comprised Texplant on July 31, 1946. Equally clear, we think, is the fact that the merchandise and machinery taken from Texplant in 1945, never having been physically restored to Texplant at any time thereafter, cannot be deemed to be included among the property which*204 comprised Texplant as of July 31, 1946. As a corollary, the part decree did not order restoration to petitioner of either the property taken from Texplant in 1945, or its value, the Restitution Commission having expressly denied petitioner's claim for damages.
*251 Petitioner, on brief, seeks to attack the conclusion expressed by Dr. Steefel, that neither the part decision nor the final decision was retroactive in effect, on the ground that Dr. Steefel allegedly conceded on cross-examination that with respect to the 1942 mortgages placed on Texplant by Bagusat, the final decision had retroactive effect to as far back as 1942. We disagree with petitioner's argument. The sense in which the witness used the word "retroactive" in connection with the ordered cancellation of the 1942 mortgages was not that which petitioner seeks to ascribe to him. Actually, all Dr. Steefel said was that in ordering cancellation of the mortgages, the final decision restored Texplant to petitioner in the same condition, insofar as encumbrances were concerned, as it had been in as of 1938, when the property had been confiscated. The cancellation of the 1942 mortgages was ordered prospectively and*205 not retroactively. The final decision refers to Article 10 (2) of the Third Restitution Law as authority for such cancellation. Article 10 (2), in turn, expressly states such "rights in rem" shall cease to exist. This is far from saying that such rights shall be deemed never to have existed.
Other questions raised by petitioner under the ownership issue are as follows: (1) Whether the London Declaration of 1943 had the effect of repealing retroactively to the date of enactment, the respective Nazi and Austrian Statutes pursuant to which petitioner's property was purportedly confiscated. (2) Whether Ordinance No. 4, promulgated by the Allied Military Government for the Fifth District of Austria on or about April 10, 1945, was effective prospectively or retroactively insofar as it proclaimed certain confiscatory laws to be null and void. (3) Whether certain acts of Benedict and Kadlec, allegedly performed in behalf of petitioner on or about April 10, 1945, and thereafter, were effective to restore ownership to petitioner prior to the occurrence of the alleged losses.
With respect to the London Declaration of 1943, respondent's position, we believe, is well taken. On the record, *206 we have found that the London Declaration was a political declaration of intent on the part of the Allied Powers, including the United States and Russia, which has not been carried out by the Government of Austria. Moreover, we think it clear that Ordinance No. 4 was entirely prospective in effect and in no way nullified transfers of title to Austrian property which were effected pursuant to the Nazi confiscatory laws prior to their abrogation by Ordinance No. 4. If the situation were otherwise it would have been unnecessary for former owners of confiscated property, such as the petitioner, to bring an action under the restitution laws in order to regain title.
Property rights are of course generally determined by the law of the place where the property is located. It may therefore be appropriate *252 to observe that in arguing before this Court that the property rights of Bagusat should be disregarded and treated as nonexistent, petitioner is in substance asking us to deny effect to the statutes and decrees of a foreign state relating to matters within the territorial limits of such state. The parties have not argued, on brief, this aspect of the petitioner's contentions, *207 and we find it unnecessary to consider it at any length in arriving at our decision of the general issue. However, we are aware of the doctrine of noninquiry into the validity of acts and laws of foreign states under which it is doubtful whether we can properly fail to give effect, in deciding the question in this proceeding, to the laws and statutes of Austria relating to rights in property in Austria, such as those under which petitioner was divested of title to his property. See Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F.2d 246">163 F. 2d 246, passim (C. A. 2, 1947), certiorari denied 332 U.S. 772">332 U.S. 772; Oetjen v. Central Leather Co., 246 U.S. 297">246 U.S. 297; Ricaud v. American Metal Co., 246 U.S. 304">246 U.S. 304. But see State of Netherlands v. Federal Reserve Bank of New York, 99 F. Supp. 655">99 F. Supp. 655 (S. D. N. Y. 1951); 57 Yale L. J. 108; 47 Col. L. Rev. 1061; and 23 N. Y. U. L. Q. Rev. 311.
As an alternative argument, petitioner argues that he was in reality the owner*208 of the property in question in 1945 because he had, "effective control." In support of this contention petitioner relies on Rozenfeld v. Commissioner, 181 F. 2d 388. He contends that even though he did not have record title to Texplant in 1945, he "had actual possession and control through his employees, Benedict and Kadlec, at the time of the Russian seizures." The Rozenfeld case is wholly inapposite. There the taxpayer was seeking as a deduction from gross income the amount of an alleged war loss pursuant to section 127 (a) (2) of the Internal Revenue Code. The Court of Appeals for the Second Circuit, in holding the taxpayer not entitled to the deduction, pointed out that although record title at the critical date was in the taxpayer, he had lost effective control which was a prerequisite to ownership. The situation in this proceeding is reversed. Petitioner not only did not have record title at the critical date, but from March 13, 1938, up to and including the last date of the alleged seizures by the Russians, petitioner had not had any contact or communication whatsoever with either Kadlec or Benedict through whom he claims to have established*209 "effective control" over Texplant. On the facts, petitioner's contention that he owned the property taken in 1945, under the theory of "effective control" cannot be sustained. Cf. Ervin Kenmore, 18 T.C. 754">18 T. C. 754.
The expert witnesses of petitioner disagreed sharply with respondent's expert witness in his conclusions on the point of the retroactivity of the part decree under the Restitution Law. It is their view that *253 Bagusat's title was rendered void ab initio. Consideration has been given to all of the evidence. We come to the conclusion that the opinion of respondent's witness, Dr. Steefel, on the crucial question under the Restitution Law and other Austrian law is well supported by the authorities which he cited.
It is held that petitioner did not own machinery and merchandise which was taken from Texplant in 1945 in the alleged value of $ 313,838.87, and that, consequently, he did not sustain losses under either section 23 (e) or 117 (j) of the Code. It follows that other issues presented need not be decided.
Decision will be entered under Rule 50.
Footnotes
1. Article 431, Austrian Civil Code: For the transfer of title of real property it is necessary that the transaction is entered into the public books provided therefor. Such entry is termed "intabulation."↩
2. The official documents appointing Kadlec and Benedict as Public Administrators include the following language: "Your attention is drawn to the applicable provisions of the Law regarding the appointment of public administrators and superintendents dated May 10th, 1945, for the rights and obligations arising out of your appointment as Public Administrator." The Law therein referred to was promulgated by the provisional government of Austria. However, it failed to obtain the sanction of Allied Control Commission. As a result, by a special statute dated February 1, 1946, published in the Official Gazette of the Republic of Austria of May 15, 1946, the May 1945 Law was rescinded.↩
3. Vol. 22, Official Reports, Supreme Court of Austria, Decisions Nos. 39 and 44 (1949).↩
4. OLG, Vienna, June 28, 1949, 2-R-273.↩
5. Created pursuant to the Third Restitution Law.↩
6. Though it is true that the nullity of deprivations of property as pronounced in Section 3 of the Third Restitution Law, is not absolute, but merely relative, and therefore, conditioned on rescinding of the transaction or action, it is ordinarily not necessary to declare such nullity in the decision made by the Restitution Commission, as repeatedly decided by the Supreme Restitution Commission (R k v 71/48, 78/48 Heller -- Rauscher 81.87), because-aside from the fact that the question of nullity is a preliminary question -- by said decision itself the restitution of the transferred property is already ordered on the basis of the established nullity of the transaction or action.
In the case at Bar petitioner was given back, under the interlocutory and the final decisions, all the property he had been deprived of; therefore, he is in a position to acquire possession of the property taken away from him and is not any more interested in such declaration.
If petitioner states in addition, that the declaratory judgment with respect to the nullity of the deprivation of property be necessary for reason of legal aspects on matters of duties, taxes and trade-regulations, such opinion cannot be accepted, because the nullity of the deprivation of property is clearly recognizable to the respective authorities by reason of the affirmative decision on restitution.↩
7. After providing that certain types of liens, not applicable to the Bagusat mortgages, shall continue in force, Article 10 (2) provides: "(2) All the other rights in rem↩ entered in a priority ranking between the time of dispossession and of restitution shall cease to exist." (Emphasis supplied.)
8. 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 --
(1) if incurred in trade or business; or
* * * *
(3) of property not connected with the trade or business, if the loss arises from fires, storms, shipwreck, or other casualty, or from theft. * * *
SEC. 117. CAPITAL GAINS AND LOSSES.* * * *
(j) Gains and Losses From Involuntary Conversion and From the Sale or Exchange of Certain Property Used in the Trade or Business. --
(1) Definition of property used in the trade or business. -- For the purposes of this subsection, the term "property used in the trade or business" means property used in the trade or business of a character which is subject to the allowance for depreciation provided in section 23 (l), held for more than the 6 months, and real property used in the trade or business, held for more than 6 months, which is not (A) property of a kind which would properly be includible in the inventory of the taxpayer if on hand at the close of the taxable year, or (B) property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or * * *
(2) General rule. -- If, during the taxable year, the recognized gains upon sales or exchanges of property used in the trade or business, plus the recognized gains from the compulsory or involuntary conversion (as a result of destruction in whole or in part, theft or seizure, or an exercise of the power of requisition or condemnation of the threat or imminence thereof) of property used in the trade or business and capital assets held for more than 6 months into other property or money, exceed the recognized losses from such sales, exchanges, and conversions, such gains and losses shall be considered as gains and losses from sales or exchanges of capital assets held for more than 6 months. If such gains do not exceed such losses, such gains and losses shall not be considered as gains and losses from sales or exchanges of capital assets. For the purposes of this paragraph:
(A) In determining under this paragraph whether gains exceed losses, the gains and losses described therein shall be included only if and to the extent taken into account in computing net income, except that subsections (b) and (d) shall not apply.
(B) Losses upon the destruction, in whole or in part, theft or seizure, or requisition or condemnation of property used in the trade or business or capital assets held for more than 6 months shall be considered losses from a compulsory or involuntary conversion.↩