(dissenting).
It seems to me that the majority opinion overlooks the fact that we deal here with a question of loss by abandonment as that term is used under the income tax regulations, not with the subject of forfeiture or abandonment of mining claims which is something quite different. The tax regulation which controls here is Regulations 111, § 29.23(e) 3, as follows:
“Sec. 29.23(e)-3. Loss of useful value. — When through some change in business conditions, the usefulness in the business of some or all of the capital assets is suddenly terminated, so that the taxpayer discontinues the business or discards such assets permanently from use in such business, he may claim as a loss for the year in which he takes such action the difference between the basis (adjusted * *) and the salvage value of the property. This exception to the rule requiring a sale or other disposition of property in order to establish a loss requires proof of some unfor-seen cause by reason of which the property has been prematurely discarded, as, for example, where an increase in the cost or change in the manufacture of any product makes it necessary to abandon such manufacture, to which special machinery is exclusively devoted, or where new legislation directly or indirectly makes the continued profitable use of the property impossible. This exception does not extend to a case where the useful life of property terminates solely as a result of those gradual processes for which depreciation allowances are authorized.”
That regulation is one which has been in effect in substantially the same form for so many years and during so many revisions of the Internal Revenue Code that it has the effect of law.1
When the provisions of that regulation are applied to the facts admitted and found here, it fits like a glove. In 1942 the mine workings and the old deposits suddenly and entirely lost their usefulness in the taxpayer’s business. As the trial court found, the economic consequences of the war were such that “the mining properties could not profiit-ably be operated in 1942”. In that year it was unable either to lease or sell the mine. In the same year it removed the steel rails, hoist, locomotive, cars and all other machinery and equipment, and the mine was allowed to cave in. These findings of the court disclosed that the usefulness of all the underground workings of the taxpayer’s property was suddenly terminated and such assets were permanently discarded from use in the business, and all this resulted from an identifiable event.
The fact that thereafter the taxpayer retained title to the claims which had some salvage value in no manner detracts from its right to claim a loss under the regulation. In fact, the regulation does not contemplate that the taxpayer should have sold or otherwise disposed of this propertyreference to it is made as an “exception to the rule requiring a sale or other disposition of property in order to establish a loss.”2 *500Also the reference in the regulation to “the salvage value of property” shows that retention of the title to the salvaged property beyond the year in question is contemplated.3
The case of Coalinga Mohawk Oil Co. v. Commissioner, 9 Cir., 64 F.2d 262, upon which the district court’s decision is based, has no point here, and did not involve any construction of the regulation here in question. In that case the taxpayer had acquired a piece of land as an oil prospect. It was never drilled and no oil was ever produced, but in 1921 the taxpayer decided that it had no value for oil and offered to sell it at a sum far less than that which it had paid for it. It succeeded in making the sale in 1923. The court correctly held that there was no identifiable event which occurred in 1921 to permit a claimed deduction in that year. Obviously that is not the situation confronting us here.
I have the impression that if all the claims here had been patented mining claims, instead of just part of them, my associates would not question the soundness of what I have just said. But they seem to find some compelling reason for denying the deduction of loss in 1942 in the fact that in that year and thereafter the corporation filed declarations of its intention to hold possession of the unpatented mining claims for the purpose of taking advantage of the suspension of annual assessment work for those years.3a The majority opinion emphasizes the inferences drawn by the trial judge: “This intention in legal contemplation necessarily related to the claims as mineral ground”, and concludes that: “Appellant merely had the right to the mineral wealth of such claims.”
I concede that I am in doubt as to whether, under the law and the facts here found, taxpayer had the right to hold its surface rights in these un-patented claims as it attempted to do. As I shall point out, if it had continued to hold them for the purposes of further development in the hope of finding new mineral deposits other than those it abandoned in the caved-in workings, then it would have retained the surface rights. On the other hand, if, as is possible, it ran the risk of forfeiture by abandoning all idea of further mining, still that would in no manner lessen taxpayer’s right to claim this loss.
Since 1872 the statute relating to un-patented mining locations has provided: “U.S.C.A. Title 30 § 26: The locators of all mining locations made on any mineral vein, lode, or ledge, situated on the public domain, their heirs and assigns, where no adverse claim existed on the 10th day of May 1872 so long as they comply with the laws of the United States, and with State, territorial, and local regulations not in conflict with the laws of the United States governing their possessory title, shall have the exclusive right of possession and enjoyment of all the surface included within the lines of their locations, and of all veins, lodes, and ledges throughout their entire depth * * (Emphasis added.) As stated in Wilbur v. U. S. ex rel. Krushnic, 280 U.S. 306, 316, 50 S. Ct. 103, 104, 74 L.Ed. 445:
*501"The rule is established by innumerable decisions of this Court, and of state and lower federal courts, that, when the location of a mining claim is perfected under the law, it has the effect of a grant by the United States of the right of present and exclusive possession. The claim is property in the fullest sense of that term; and may be sold, transferred, mortgaged, and inherited without infringing any right or title of the United States. The right of the owner is taxable by the state; and is ‘real property,’ subject to the lien of a judgment recovered against the owner in a state or territorial court. (Cases cited.) The owner is not required to purchase the claim or secure patent from the United States; but, so long as he complies with the provisions of the mining laws, his pos-sessory right, for all practical purposes of ownership, is as good as though secured by patent.”
This property right extends not merely to the mineral deposits, — the veins or lodes in place, — but the locator or his successor has an exclusive right of possession of the surface. In Clipper Mining Co. v. Eli Mining & Land Co., 194 U.S. 220, 226, 24 S.Ct. 632, 634, 48 L.Ed. 944, it was said:
“It will be seen that § 2322 gives to the owner of a valid lode location the exclusive right of possession and enjoyment of all the surface included within the lines of the location. That exclusive right of possession forbids any trespass. No one, without his consent, or, at least, his acquiescence, can rightfully enter upon the premises or disturb its surface by sinking shafts or otherwise. * * * That exclusive right of possession is as much the property of the locator as the vein or lode by him discovered and located.”4
I think that the common understanding in the western mining states is as stated in McKenzie v. Moore, 20 Ariz. 1, 176 P. 568:
“The unquestionable right of the locator to the possession of the area within the boundaries of the claim marked on the ground by the requisite monuments as described in the location notice posted at the location monument carries the right to possession of every appurtenant belonging to the realty, including timber, soil, country rock, percolating waters, natural springs, except certain mineral springs and other things not material to this discussion.”5
The locator of a mining claim acquires by his location such an exclusive right to the surface within his exterior boundaries that the Government, on the issue of patent therefor, cannot insert any exception for town lots within those boundaries, and such an exception, if inserted in the patent, is void. Talbott v. King, 6 Mont. 76, 9 P. 434. Error dismissed, Gwin v. Talbott, 136 U.S. 637, 643, 10 S.Ct. 1068, 34 L.Ed. 552.
I think it is clear that the owner of a completed mineral location does not, in the absence of an intent to abandon the whole claim, lose his right to possession merely by ceasing his mining operations. At the risk of having the claim open to relocation and forfeiture, the owner must satisfy the annual labor requirements of the statute, Title 30 U.S. C.A. § 28, but this labor is not required to consist of the extraction of minerals.6
*502If this particular taxpayer, after abandoning its old workings, had undertaken to expend $100 per year per claim in drill testing this ground for the purpose of discovering deposits other than those previously worked, this would satisfy the annual labor requirement. Walton v. Wild Goose Mining & Trading Co., 9 Cir., 123 F. 209, 217, 218.
There is no evidence here that in filing the declaration of intention to hold possession of the unpatented mining claims the taxpayer intended or undertook to retain anything other than its surface rights to these unpatented claims. The reality of those surface rights cannot be questioned. If it be assumed that surface improvements or surface work upon a mining claim cannot meet the annual labor requirement when the locator has in prospect no further mining operations within the claim,7 the only result would be that the claims here would be open to relocation if the taxpayer had attempted to hold them through work and improvements, not meeting the standards of the Act. Ickes v. Virginia-Colorado Development Corp., 295 U.S. 639, 645, 55 S.Ct. 888, 79 L.Ed. 1627.
But if we assume for the sake of argument, that aside from doing some digging of prospect holes, as in the Walton case, supra, or in United States v. Iron Silver Mining Co., C.C., 24 F. 568, or in sinking drill holes there would be no conceivable type of assessment work that could be done upon these claims, and if we also assume that the suspension statute was intended to be operative only in cases where the locator might hold his claim by the performance of annual labor, then the most that could be said would be that these particular mining claims were subject to relocation because the taxpayer was attempting to claim that to which he was not entitled under the law. But whichever way it be, whether the taxpayer properly and validly retained its surface rights to these claims, or whether it retained only a forfeitable interest therein, the consequence, taxwise, is the same. An abortive attempt to hold the surface alone would not tend in any manner to prove that the taxpayer had not abandoned the caved-in workings. Those on the unpatented claims were just as much abandoned as those on the patented claims. The working portion of these claims and their mineral deposits had been completely and finally abandoned in the year 1942 and the loss was made ascertainable and definite by an identifiable event. This is not the case of a simulated loss. The loss is real. The only question is as to the year in which it occurred. I think that the majority have given a wrong answer.
. See the reference to portions of this regulation in Boehm v. Commissioner, 326 U.S. 287, 292, 66 S.Ct. 120, 90 L.Ed. 78.
. A multitude of cases so hold. S.S. White Dental Mfg. Co. v. United States, 55 F. Supp. 117, 121, 102 Ct.Cl. 115; Wheeling Tile Co. v. Commissioner, 4 Cir., 25 *500F.2d 455; United States v. Hardy, 4 Cir., 74 F.2d 841; Denman v. Brumback, 6 Cir., 58 F.2d 128; Rhodes v. Commissioner, 6 Cir., 100 F.2d 966; Dayton Co. v. Commissioner, 8 Cir., 90 F.2d 767; Commissioner v. Hoffman, 2 Cir., 117 F.2d 987. Cf. also Commissioner of Internal Revenue v. Peterman, 9 Cir., 118 F.2d 973.
. Note the case of Mine Hill & Schuylkill Haven R. Co. v. Smith, 3 Cir., 184 F.2d 422, where a railroad in 1943 procured permission from the Interstate Commerce Commission to abandon a certain two mile long branch line originally designed to serve a certain mine. It sought to deduct a loss on account thereof in that year. It was held that the taxpayer’s lack of intention to abandon before 1943 was not decisive, and that since the line had in fact not been used for some twelve years prior thereto the deductible loss was sustained in an earlier year and not in the taxable year 1943.
See the historical note appended to Title 30, § 28a, U.S.C.A.
. At page 224, of 194 U.S., at page 633 of 24 S.Ct. of the same case: “ ‘Some of the richest mineral lands in the United States, which have been owned, occupied and developed by individuals and corporations for many years, have never been patented.’ ”
. For a discussion of the locator’s right to the timber on his claim, even when located in a forest reserve, see United States v. Deasy, D.C., 24 F.2d 108.
. Of course the removal of ore will satisfy the labor requirement but it may be satisfied not only by “work and labor”, *502but by “improvements” which may include buildings and other structures, Power v. Sla, 24 Mont. 243, 61 P. 468, and roads to and from the claims, Doherty v. Morris, 17 Colo. 105, 28 P. 85; Sexton v. Washington Min. & Mill Co., 55 Wash. 380, 104 P. 614. Even the services of a watchman have been sufficient to meet this requirement. Altoona Quicksilver M. Co. v. Integral Quicksilver M. Co., 114 Cal. 100, 45 P. 1047. All this is subject to the proviso that what is offered as assessment work be calculated to bring about tbe development of the claim. Jackson v. Roby, 109 U.S. 440, 3 S.Ct. 301, 27 L.Ed. 990.
. Cf. St. Louis Smelting & Refining Co. v. Kemp, 104 U.S. 636, 655, 26 L.Ed. 875: “Labor and improvements, within the meaning of the statute, are deemed to have been had on a mining claim * * * when the labor is performed or the improvements are made for its development, that is, to facilitate the extraction of the metals it may contain * * * ”