*1766 Petitioner acquired in 1904 by devise under the will of her deceased husband property theretofore used by them as a residence. Petitioner continued to use the property as her residence until 1924, when it was abandoned for that purpose and offered for sale. It was never leased or rented, but was sold at a loss in 1926. Held, the loss so resulting is not deductible under section 214(a)(5) of the Revenue Act of 1926, not having been incurred in a transaction entered into for profit.
*1134 This is a proceeding for the redetermination of a deficiency in income tax for the year 1926 in the amount of $3,912.05. The issue is whether or not the petitioner sustained a deductible loss upon the sale of certain real estate in the taxable year.
FINDINGS OF FACT.
The petitioner is an individual, with residence at 2450 Lake View Avenue, Chicago, Ill.
Prior to 1904 the petitioner's husband, George T. Smith, now deceased, acquired the property known as 4717 Grand Boulevard, Chicago, Ill., for use as a residence, and the same was occupied as a residence*1767 by the said George T. Smith and the petitioner until the death of George T. Smith in 1904. The petitioner thereupon acquired the said property by devise under the will of the said George T. Smith, deceased, and thereafter occupied it as a residence until June, 1924.
In June, 1924, the neighborhood in which the property was located having completely changed, and the property being considered unfit for further residence by the petitioner, owing to an influx of colored people, she ceased to use the property as her residence and resolved to sell it; the property was placed with Eugene Bournique & Company, real estate agents, for sale, and the said agents advertised it for sale. It was not at any time thereafter occupied by the petitioner nor intended to be occupied by her or rented by her to anyone else.
The petitioner was advised, however, that an immediate sale of the property would result in a large loss and that it would be better to hold the property for a possible rise in price. Subsequently offers were received for the property, but they were not accepted.
*1135 The fair market value of the property at the time the petitioner moved out of it in June, 1924, was*1768 $50,000. It thereafter continued to decline in value, owing to the rapid and continuous change of the neighborhood, and in May, 1926, it was sold through the exclusive agency of the said Eugene Bournique & Company, with whom it had been continuously listed for sale after June, 1924, for the net amount of $42,074.67. The depreciation sustained on the property from the date the petitioner moved out of it in June, 1924, until the date of its sale was $2,000.
The fair market value of the property at the date of its acquisition by the petitioner, less depreciation sustained thereon to June, 1924, and its fair market value on March 1, 1913, less depreciation sustained thereon to June, 1924, were respectively in excess of its fair market value in June, 1924.
The petitioner took as a deduction on her return for 1926 the amount of $40,017.05 as a loss upon the transaction hereinbefore referred to. The entire deduction was disallowed by the respondent in determining the deficiency.
The foregoing facts were either stipulated by the parties or alleged and admitted in the pleadings.
OPINION.
TRAMMELL: The petitioner deducted from gross income in her return for 1926 the amount*1769 of $40,017.05, which was claimed a loss sustained on the sale of property formerly occupied by her as a residence. The petitioner acquired this property by devise under the will of her husband, who died in 1904, and it was thereafter continuously used by her for residential purposes until 1924. After June, 1924, the property was no longer used by the petitioner as a residence, nor did she thereafter intend so to use it, nor was it leased or rented by her to anyone else. Abandoning the property as a residence, petitioner resolved to sell it, and to that end placed it in the hands of a real estate agent. It was sold at a loss in May, 1926.
The Revenue Act of 1926, in section 214(a)(5), provides that in computing the net income of individuals there shall be allowed as deductions "losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in any transaction entered into for profit, though not connected with the trade or business." The question here is whether the loss claimed as a deduction was incurred in a transaction "entered into for profit."
In *1770 , the owner of a house originally bought as a residence in 1892, abandoned its use for that purpose in 1901 and leased the property at a stipulated rental, which continued for approximately 19 years until sold in 1920. The court held that *1136 the leasing of the house constituted a transaction entered into for profit, saying:
But the words "any transaction" as used in subsection (a)(5) are not a technical phrase, or one of art. They must therefore be taken in their usual sense, and, so taken, they are, we think, broad enough to embrace at least any action or business operation, such as that with which we are not concerned, by which property previously acquired is devoted exclusively to the production of taxable income.
Here, a wholly different situation is presented. When the petitioner abandoned her property as a residence, she did not devote it exclusively or even partially to the production of taxable income, nor to any business use, nor place it on the market for such purpose. She ceased to use it as a residence for the reason that she considered the neighborhood in which it was situated had become undesirable*1771 as a residential section, and so she decided to sell it, not rent it and thus convert it to business property. This does not present a case of conversion of property acquired as a residence into business property before its sale. In these circumstances, the loss resulting from its sale in 1926 is not a business loss or one incurred in a transaction entered into for profit, within the purview of the above quoted provisions of the statute. ; ; ; ; ; , affirming .
The action of the respondent is approved.
Judgment will be entered for the respondent.