*121 Decision will be entered under Rule 50.
1. Petitioner left France in May 1940, at which time he owned certain real property, consisting of lands and buildings, and personal property, all of which in the latter part of June 1940 was in the German occupation zone. On his return to France in 1946 petitioner found the land and improvements intact, with the exception of one small building. Part of the personal property was still on the premises, but the greater part of it was gone and petitioner does not know when it was seized or destroyed. Held, that petitioner is entitled to take a loss under section 127 (a) (2), I. R. C., for the cost of his land and improvements after proper adjustment is made for depreciation on the improvements to the date of declaration of war with Germany and for the one small building which was gone; held, further, that petitioner has not proved that certain parts of his personal property were in existence December 11, 1941, when the United States declared war against Germany and, therefore, is not entitled to a war loss thereon; held, further, that as to certain other personal property petitioner has proved that it was in existence on December*122 11, 1941, and has proved sufficient facts to entitle him to take a war loss thereon under section 127 (a) (2).
2. On the evidence, held, petitioner is entitled to a deduction of $ 500 in the taxable year 1941 for expenses incurred in entertaining clients of his firm, for which he was not reimbursed.
*222 This proceeding involves a deficiency in income tax for the calendar year 1941 in the amount of $ 5,405.19. In determining this deficiency the respondent made two adjustments to petitioner's net income as disclosed by his return for the year 1941. In a statement attached to the deficiency notice the respondent explains the adjustments as follows:
(a) The amount of $ 750.00 for alleged entertaining and traveling expenses claimed in your 1941 return does not constitute a deductible expense under the provisions of Section 23 (a) of the Internal Revenue Code.
(b) The Bureau holds that the casualty loss of $ 10,000.00 deducted in your 1941 return, representing the estimated value of your residence located in the part of France, which was occupied by the German military forces*124 in June 1940, does not constitute a proper deduction from gross income for the taxable year under the provisions of Section 23 (e) or Section 127 of the Internal Revenue Code.
Petitioner contests these adjustments by the following assignments of error:
(a) The Commissioner of Internal Revenue erred in that he failed to allow the petitioner a deduction for war losses sustained by the petitioner during the calendar year 1941.
*223 (b) The Commissioner of Internal Revenue erred in that he failed to allow the petitioner a deduction of $ 750.00 for business expenses incurred and paid for by the petitioner.
Petitioner in his brief contends that he is entitled to the loss deduction referred to in paragraph (b) of respondent's statement above solely under the provisions of section 127 (a) (2) of the Internal Revenue Code.
FINDINGS OF FACT.
Petitioner is an individual, residing in New York, New York. His return for the calendar year 1941 was filed with the collector for the third district of New York. During the taxable year 1941 petitioner was a resident alien of the United States.
Issue No. 1. -- On December 11, 1941, petitioner owned real and personal property located at Courgent, *125 France.
The United States declared war on Germany on December 11, 1941, and Courgent, France, was then within the area occupied and controlled by Germany.
The petitioner's real property in Courgent, France, on the above date, consisted of 10 acres of land which had on them one large 10-room house, one 3-room house, one 2-room house, a 3-car garage, and gardens.
Petitioner purchased the above real property in August 1932 for 120,000 francs, in addition to which he paid the required tax to the Government of 28,800 francs, making a total cost of 148,800 francs, or $ 5,841.88 in American currency at the then exchange rate. Between the date of purchase and 1937 petitioner made improvements to the real property at a total additional cost of 300,000 francs, or $ 11,760 at the above exchange rate.
Petitioner's personal property consisted of valuable oil paintings, books, and oriental rugs, which cost him 310,875 francs, or $ 12,186.30 at the same exchange rate used above, and furniture which cost $ 2,530.
Neither the real property nor any of the items of personal property was sold, conveyed or given away by petitioner prior to or in 1941.
Petitioner last saw the property in question prior*126 to December 11, 1941, in May 1940, when he left Courgent with his family. The property was intact at that time.
Petitioner was in Courgent again in 1946. At that time there were in existence the real property, with the exception of one of the small houses; oil paintings, books, and rugs that cost petitioner 106,000 francs or $ 4,155.20, using the same rate of exchange as above, and furniture that cost him $ 300.
On May 19, 1940, petitioner left Courgent for Portugal, arriving there on June 22, 1940, where he remained for two months, and in *224 September 1940 he came to the United States. Petitioner did not return to France until June 1946, as stated above.
Upon leaving France in May 1940 petitioner asked a neighbor to look after his property. About the end of June 1940 or the first part of July he received letters from the neighbor stating that everything was in perfect order. Petitioner had no contact with this neighbor after that time. Petitioner, however, in 1945 charged the neighbor with theft, as some of the items of personal property had been found in her house by his son when he was in France with the United States Army.
Issue No. 2. -- Petitioner in 1941 was*127 vice president and a director of H. S. Cramer & Co., a firm located in New York City, which imported and exported raw materials, and, as such, he had, among other duties, the obligation to develop business, create new outlets, and see people from whom the company could buy merchandise and people to whom it could sell merchandise, and to establish contacts in order to develop the business.
H. S. Cramer & Co. did $ 5,500,000 of import and export business, and it paid petitioner $ 28,000 as his salary. The company did not reimburse petitioner for the sums of money he expended in the entertainment of the firm's customers.
Petitioner spent at least $ 500 of his own money during 1941 for the entertainment of customers and prospective customers of H. S. Cramer & Co.
OPINION.
The first issue we have to decide is whether petitioner is entitled to the deduction of a war loss from his 1941 income and, if so, how much he is entitled to deduct. It has been held by the decided cases of this Court that a taxpayer, to take a war loss deduction in 1941 under section 23 (e) of the Internal Revenue Code, must prove that the property was in existence during that year; or, to take such loss under section*128 127, he must prove that it was in existence at the time the United States declared war on Germany. See Ernest Adler8 T. C. 726; Eric H. Heckett, 8 T. C. 841. In the instant case petitioner does not claim any loss under section 23 (e). Therefore, that section may be disregarded. He bases his claim entirely under section 127 (a) (2) of the code, as added by section 156 of the Revenue Act of 1942, which reads in part as follows: "Property in Enemy Countries. -- Property within any country at war with the United States, or within an area under the control of any such country on the date war with such country was declared by the United States, shall be deemed to have been destroyed or seized on the date war with such country was declared by the United States."
Petitioner made out his 1941 income tax return in March 1942, and it *225 is his contention that he was permitted by the foregoing statute to assume that all of his property located in German occupied France on December 11, 1941, was lost or destroyed on December 11, 1941. He contends that the statute created a conclusive presumption for the benefit of the taxpayer, *129 who had no way of determining the existence or condition of his property in an enemy occupied country. We think petitioner has correctly stated the general rule as laid down by the applicable statute. However, in cases where the Commissioner, in his determination of a deficiency, has disallowed the deduction of the claimed war loss, there are at least two things which the taxpayer must prove to establish his case: (1) That the property was in existence and owned by the taxpayer on the date war was declared; (2) the cost of such property, properly adjusted for depreciation to the basic date. Ernest Adler, supra;Eric H. Heckett, supra.Petitioner claims losses with reference to both real property and personal property, and the facts with reference thereto are set forth in our findings of fact.
We shall first take up the question of his real property loss. In contending that petitioner has failed to prove his real property loss under the applicable statute, respondent stresses Regulations 111, section 29.127 (a)-1, and particularly the following portion thereof:
For property to be treated as resulting in a war loss, such *130 property must be in existence on the date prescribed in section 127 (a) (2) as the date it is deemed destroyed or seized * * * and for the taxpayer to claim a loss with respect to such property he must own such property or an interest therein at such time. If, before such time, the property was destroyed or confiscated, section 127 is not applicable with respect to such property. For example, a taxpayer owned property in an enemy country before war was declared on such enemy by the United States, and such property was confiscated by the enemy before the date war was declared. The seizure was not in the course of military or naval activities. The taxpayer may not claim a war loss with respect to such property under section 127.
It is respondent's contention that petitioner has failed to prove that the 10 acres of ground which petitioner owned at Courgent, France, together with the improvements thereon, were in existence on December 11, 1941. We do not agree with this contention.
It is true, of course, that petitioner testified that he last saw the property in May 1940, when he left Courgent with his family in fleeing before the advancing German army, and that he did not know what*131 its condition was in 1941, when the United States declared war on Germany.
However, petitioner also testified that he went back to France in 1946 and found his real property still there, together with the improvements thereon, except one of the small houses. We think this is sufficient proof that the property was in existence, with the exception of the one small house, when war was declared on December 11, 1941, *226 and that petitioner is entitled to take his loss under section 127 (a) (2) of the code if he has properly proved the amount of his loss.
The Commissioner's regulations treat war losses under section 127 as losses by reason of casualty, the casualty being the presumed destruction or seizure of the property. The regulations set forth how the amount of war losses shall be determined. See section 29.127 (b) (1) of Regulations 111, where it is said in part:
The loss is determined in the same manner as in the case of any other loss by casualty (see sections 29.23 (e)-1 and 29.23 (f)-1) except that the possibility of recovering such property described in section 127 (a) or (e) or of recovering any compensation (other than insurance or similar indemnity) on account of*132 such property or interest in the taxable year or in any future taxable year (such as the return of the property, or an award by a government, upon the termination of the war) is disregarded both in determining whether the loss is evidenced by a closed and completed transaction and in determining the amount of the loss. Insurance or any other certain indemnity by a government is not disregarded.
As we said in Eric H. Heckett, supra: "The rule applicable to casualty losses under section 23 (e) (3) is that the deduction for the loss may not exceed costs, and, in the case of depreciable nonbusiness property, may not exceed the value immediately before the casualty. Helvering v. Owens, 305 U.S. 468."
Petitioner testified at the hearing that he purchased the real property in question in 1932 for a total of francs, which at the then exchange rate equaled $ 5,841.88, including transfer tax, and that the property was improved at the time. No testimony was given from which we could allocate this cost between the land and improvements.
Petitioner further testified that after he purchased the property in 1932, and prior to*133 1937, he improved the property at a total additional cost of 300,000 francs, or $ 11,760, using the same rate of exchange as we heretofore mentioned. Petitioner does not give the dates of these improvements or any other data by which we could determine with any degree of accuracy the depreciation which took place between the dates that such improvements were made and December 11, 1941, when war with Germany was declared. But, as we have already pointed out, petitioner did own on that date property which was situated in the war zone, and it is clear that it had considerable value. Are we to deny him any loss because we can not determine the amount of the loss with the satisfactory accuracy which we would like? We think not. It seems to us that under the facts of the instant case we should apply the doctrine announced by the court in Cohan v. Commissioner, 39 Fed. (2d) 540, and make the best approximation of petitioner's loss that we can under the evidence. In the Cohan case the Second Circuit, in holding that the Board of Tax Appeals erred in not allowing as a deduction to the taxpayer some portion of the entertainment expenses which he *134 was claiming, said:
*227 The Board refused to allow him any part of this, on the ground that it was impossible to tell how much he had in fact spent, in the absence of any items or details. The question is how far this refusal is justified, in view of the finding that he had spent much and that the sums were allowable expenses. Absolute certainty in such matters is usually impossible and is not necessary; the Board should make as close an approximation as it can, bearing heavily if it chooses upon the taxpayer whose inexactitude is of his own making. * * * It is not fatal that the result will inevitably be speculative. Many important decisions must be such.
As we have already stated, petitioner's real estate, together with improvements thereon, cost him $ 5,841.88 in 1932, and between that date and 1937 he added improvements which cost him $ 11,760, making total cost of the land and improvements $ 17,601.88. From the meager evidence which we have as to the kind and nature of the improvements, we think 50 per cent of the above total costs will, in all events, be sufficient to absorb the depreciation which took place from the dates of original acquisition of the property and*135 the adding of the improvements to the date of the declaration of war with Germany, including the one small building which was gone. This adjustment reduces the value of the property on the basic date to $ 8,800.94, and we hold that amount is the measure of petitioner's loss on this real property under section 127 (a) (2) of the code. Cf. Isbell-Porter Co. v. Commissioner, 40 Fed. (2d) 432, reversing 12 B. T. A. 621; Conrad & Co. v. Commissioner, 50 Fed. (2d) 576, reversing 13 B. T. A. 1332. Max German, 2 T. C. 474. The fact that petitioner was able to repossess this property when he returned to France in 1946 does not prevent him from taking his loss with respect to the property in 1941 under section 127 (a) (2), because that section provides that such property "shall be deemed to have been destroyed or seized on the date war with such country was declared by the United States."
We next take up the question as to whether petitioner is entitled to deduct as a war loss the cost of oil paintings, books, and oriental rugs which cost*136 him $ 12,186.30, on the basis of the same exchange rate heretofore used, and furniture which cost him $ 2,530, all of which was situated in the buildings on the land which he owned at Courgent, France, and was there when he fled before the advancing German army in May 1940. The facts show that oil paintings, books, and rugs that cost petitioner $ 4,155.20, and furniture that cost petitioner $ 300 were there on the premises in 1946, when petitioner returned for a temporary visit to France. The balance of the property was gone. Petitioner testified that he was without any knowledge when this personal property which was not there when he went back had been taken. He did not know whether it had been seized or stolen in 1940 or 1941, or what had become of it. Therefore it seems plain that under the rule announced in Ernest Adler, supra, petitioner has failed to prove that this particular property was in existence December 11, 1941. Therefore *228 as to that part of his claimed loss, petitioner can not prevail. See also the second issue in Eric H. Heckett, relating to loss of personal property.
We now come to the question whether petitioner*137 is entitled to take a loss of $ 4,155.20 on account of the oil paintings, books, and rugs which were still on the premises when petitioner returned in 1946, and the $ 300 for furniture which was also still there.
Here again as to this particular personal property which petitioner found on his return to France, and which was in existence, December 11, 1941, the question is, as it was in regard to the real property mentioned above, Has petitioner proved the proper measure of his loss?
Petitioner has testified as to the cost of this property, and it is from this testimony that we have made our findings of fact as to its cost. Petitioner has not, however, given us sufficient facts and data from which we could accurately compute depreciation on such property from the date of its acquirement to December 11, 1941.
We apply the same rule here as we applied to the real property, and for the same reason. From the meager evidence which we have as to the kind and nature of this property, we think 50 per cent of the cost of this particular personal property will be sufficient to absorb the depreciation which took place between the date of its acquisition to the date of the declaration of war*138 with Germany. This adjustment reduces the value of the oil paintings, books, and rugs to $ 2,077.60 and of the furniture to $ 150, on the basic date, and we hold that these amounts represent the measure of petitioner's loss on these personal property items under section 127 (a) (2) of the code.
As to whether the amounts which we have herein allowed as losses to petitioner under section 127 (a) (2) were income to him in 1946 when he returned to France and repossessed the property, we express no opinion. We do not have that year before us.
The second issue relates to petitioner's claimed expense for entertainment of customers and prospective customers of H. S. Cramer & Co. and for traveling expenses, for which he was not reimbursed. Petitioner did not keep any record of separate items of these expenditures. However, he testified as to them and as to the circumstances under which he made them, and we are convinced that he expended at least $ 500 for entertaining customers of H. S. Cramer & Co. in a business way in New York City for which he was not reimbursed by the corporation. He earned a salary of $ 28,000 as one of the chief executive officers of that company, and he testified*139 that in such capacity he felt that it was good business policy to make the expenditures. We think this $ 500 is deductible under section 23 (a) (1) (A) of the code. Cf. Lewis F. Jacobson, 6 T. C. 1048. It may well be that petitioner expended for traveling expenses the balance of the $ 750 for which he claims deduction, but we do not think he has furnished *229 us with sufficient facts to justify us in allowing him a deduction of anything for traveling expenses. As respondent points out in his brief:
In Commissioner v. Flowers326 U.S. 465, the Supreme Court stated that three conditions must be satisfied before a traveling expense deduction may be made under section 23 (a) (1) (A) of the Internal Revenue Code:
(1) The expense must be a reasonable and necessary traveling expense, as that term is generally understood. This includes such items as transportation fares and food and lodging expenses incurred while traveling.
(2) The expense must be incurred "while away from home."
(3) The expense must be incurred in pursuit of business. This means that there must be a direct connection between the expenditure *140 and the carrying on of the trade or business of the taxpayer or of his employer. Moreover, such an expenditure must be necessary or appropriate to the development and pursuit of the business or trade.
We do not think petitioner's evidence meets the foregoing tests for a deduction for traveling expenses. Therefore, petitioner's claim for a deduction, in so far as it relates to traveling expenses, is denied.
Decision will be entered under Rule 50.