*2462 Heiner v. Tindle,276 U.S. 582">276 U.S. 582, and Joseph F. Cullman, Jr.,16 B.T.A. 991">16 B.T.A. 991, followed in allowing a loss on a property originally acquired as a residence, later rented, and finally sold.
*172 The Commissioner determined a deficiency of $2,652.48 in the petitioner's income taxes for the year 1926. The petitioner alleges that the Commissioner erred in disallowing the deduction from gross income of $29,395 representing a loss sustained by him on the sale of property in 1926.
FINDINGS OF FACT.
The petitioner, at all times material hereto, had his permanent residence at 5475 Darlington Road, Pittsburgh, Pa. For a number of years he had lived in Pittsburgh, where he was engaged in the steel business.
In 1919 he purchased a summer residence for $78,000. The property was located in Coraopolis Heights, near Pittsburgh, and consisted of about 37 acres of land fronting about 1,800 feet on a main improved highway, a large brick house, farmer's cottage, stable, garage, fruit trees, garden and*2463 considerable shrubbery. The house was completely furnished. The probable useful life of the buildings on the date acquired was not less than 30 years and that of the furnishings was not less than 15 years. In 1923 the petitioner made additions and improvements to the property at a cost of $1,395. The character of these additions and improvements is not disclosed by the record. For the purpose of computing the petitioner's loss, the following is a proper allocation of the original cost of the property in 1919:
| Cost of buildings | $50,000 |
| Cost of furnishings | 20,000 |
The parties stipulated that the value of the property on May 1, 1925, was the same as cost, $79,395.
The petitioner used this property as a summer home for himself and his family from 1919 to 1924, inclusive, although the place was not used in 1923 after the middle of August and was used in 1924 only over a few week-ends. In June, 1923, the steel company with which the petitioner was associated acquired interests in the east which necessitated the presence of the petitioner in Philadelphia for a while. His family went to Atlantic City in 1923 to be near him. About this time the petitioner determined*2464 to abandon the use of the Coraopolis Heights property as a summer home and dispose of it by sale. He began to look for a buyer. Some effort was made in 1924 to lease the property. In 1925 it was first listed for sale or lease. In 1925 the petitioner, by his own efforts, secured a tenant and leased the property for 6 months, beginning May 1, 1925, for $3,000. In May, 1926, he was in urgent need of money and sold the property for $50,000. He reported $29,395, the difference between the cost of the property and the sale price, as a loss in *173 his 1926 tax return. The Commissioner disallowed the deduction of this amount.
OPINION.
MURDOCK: The Supreme Court has held in , affirming the , that where property originally acquired for residential purposes is subsequently devoted exclusively to the production of taxable income, a transaction is entered into for profit at the date of the change in use from which a loss, deductible under section 214(a)(5), may result. Such a situation is presented in the present case, and following *2465 , we hold that this petitioner is entitled to deduct the amount of his loss. See also ; ; affd., ; ; .
The next question is to determine whether or not from the evidence the amount of the petitioner's loss can be computed. In , we held that adjustments to both the established cost and the value at the time the property was rented should be made for depreciation and the net sale price deducted from the smaller of the two amounts to ascertain the deductible loss sustained. Following that case, it is apparent that as the value of the property in the present case on May 1, 1925, was the same as cost in 1919, the adjustments for depreciation will be the same, no matter which figure is taken. The cost of the property to the petitioner should, therefore, be reduced by adjustments for depreciation in accordance with our decisions in the Cullman and Brooks cases, supra.*2466 The petitioner has not introduced sufficient evidence in this case to enable us to make these adjustments accurately, but we will allow him such relief as the evidence justifies, and to this end we have held that of the total cost of the property, $50,000 should be allocated to the cost of the buildings, and $20,000 to the cost of furnishings, because we are satisfied that no greater amounts should be allocated to either. We have not been told whether the $1,395 spent in 1923 was spent for improvements to the land, to the buildings or to the furnishings. For the purpose of computing the loss, we hold that the $1,395 was spent for furnishings, as this will benefit the petitioner the least. The loss may be thus computed and deducted from the petitioner's income as we are satisfied that he is entitled to deduct at least this amount and might have been entitled to deduct a greater amount if he had more adequately proved facts which it was his burden to prove.
Judgment will be entered under Rule 50.