*2622 The action of respondent in disallowing a deduction as a loss on the sale of property approved for lack of evidence.
*197 This is a proceeding for the redetermination of a deficiency in income tax for 1920 in the amount of $3,999.80. The error assigned is the action of the respondent in disallowing a deduction claimed by the petitioner in his return on account of a loss alleged to have been sustained from the sale of a farm, and in disallowing a deduction claimed on account of brokers' commissions, counsel's fees and miscellaneous expenses in connection with said sale.
*198 FINDINGS OF FACT.
The petitioner is an individual residing at Katonah, N.Y. In 1911 and 1921 the petitioner purchased two farms at Pawling, N.Y., as an investment and with the hope of realizing a profit on the operation or the resale thereof. The two farms cost at least $20,000. After purchasing the farms he built a large dairy barn at a cost of at least $20,000. It was made of cement and stucco and contained modern improvements used on a dairy farm. He also*2623 made improvements in the way of water works, fences and other improvements to the extent of $3,500. In addition thereto he made improvements and repairs on the residence which was upon one of the farms to the extent of $3,000. The buildings upon the farms were in bad repair and the residence was fixed up in order to put in into proper condition to be habitable. The improvements were made the latter part of 1912 or in the year 1913. In the purchase of the farms for $25,000 no allocation was made of the purchase price to buildings and land, but the house after the improvements had been made had a probable life of 25 years. The barn had an expected life of 50 years. One thousand five hundred dollars was paid by the petitioner as brokers' commission in connection with the sale of the property.
The petitioner in his return claimed as a deduction a loss of $6,000 alleged to have been sustained on the sale of the two farms and also claimed a deduction of $896.93 representing commissions and legal fees in connection with the sales. These deductions were disallowed by the respondent, resulting in the deficiency asserted.
OPINION.
TRAMMELL: In order to entitle a petitioner to*2624 the deduction on account of the loss on sale of the property which was acquired prior to March 1, 1913, there must be evidence both of the cost and of the March 1, 1913, value of the property, and the lesser of these amounts, considering depreciation allowable, whether claimed or not, must be greater than the selling price.
Only one witness testified in the case, and he was unable to testify as to the March 1, 1913, value of the properties. Considering the fact that the properties were acquired in 1911 and 1912, and that the improvements were not completed until "about 1913," even if we should assume that the cost and the March 1, 1913, value were the same, still we are unable to determine from the evidence the amount of depreciation which was allowable to the petitioner on the depreciable property. While the petitioner's witness testified that according to his recollection no part of the purchase price of the *199 farms was allocated to the buildings thereon, we do not interpret this as meaning that buildings had no value or that some portion of the purchase price did not represent cost of the buildings which are subject to depreciation allowances. There is no testimony*2625 as to what would be a fair allocation of the purchase price to these buildings. It seems clear that, when land is purchased on which buildings are located, we may not find as a fact, in the absence of evidence to the contrary, that the buildings cost nothing and that the purchaser of such property would not be entitled to some depreciation allowance on buildings so acquired.
When we consider the amount of depreciation which would be allowable by law, we are unable to determine that the petitioner has sustained a deductible loss, even if we should assume, as has been stated, that the cost and the March 1, 1913, value were the same, which assumption we do not indulge.
With respect to the deduction paid on account of commissions and other expenses in connection with the sale of the property, it is our opinion that the petitioner is entitled to such deductions as ordinary and necessary expenses paid during the taxable year. ; .
Judgment will be entered under Rule 50.