SIMONS, Circuit Judge.
The appellee obtained judgment below for recovery of income taxes for 1922 collected under a deficiency assessment by appellant's decedent, collector of internal revenue. The assessment resulted from the disallowance of a deduction taken by the taxpayer for loss incurred on land in the Bitter Root Valley, Mont., purchased in 1912.
The land, in which the taxpayer had a half interest, was arid and undeveloped, was purchased for resale, and was to be made available for fruit raising by irrigation furnished by the Bitter Root Valley Irrigation Company, a private corporation. By 1920 the irrigation system had become deteriorated and useless, and the irrigation company insolvent and in receivership. The landowners in the Valley thereupon formed a political organization under the laws of Montana known as the Bitter Root Irrigation District, which purchased the old irrigation system. Application was made to the district court of the Fourth judicial district of Montana in and for the county of Ravalli, and an order obtained on the 24th of June, 1922, authorizing
The loss claimed was deducted by Brumback under section 214 (a) of the Revenue Act of 1921 (42 Stat. 239). It was disallowed by the Commissioner in reliance upon the case of Appeal of A. J. Schwarzler, 3 B. T. A. 535, and upon article 141, of Regulation 62, of the Bureau of Internal Revenue, which provides inter alia that losses incurred in any transaction entered into for profit must usually be evidenced by a closed and completed transaction. The Schwarzler Case seems to hold, and it is contended by the appellant that it does hold, that losses suffered in the purchase of real estate cannot be determined until the property is sold, and that there can be no closed transaction with respect to real estate short of its sale, voluntary or enforced. We think no such inflexible rule is to be found either in the statute or the regulation. The general requirement that losses be deducted in the year in which they are sustained calls for a practical, not a legal, test. Lucas v. American Code Company, 280 U.S. 445, 50 S.Ct. 202, 74 L. Ed. 538. Having in mind the practical test, we think the case falls within United States v. White Dental Company, 274 U.S. 398, 47 S.Ct. 598, 600, 71 L. Ed. 1120. The pertinent language of that decision is as follows:
"The case turns upon the question whether the loss, concededly sustained by the respondent through the seizure of the assets of the German company in 1918, was so evidenced by a closed transaction within the meaning of the quoted statute and treasury regulations as to authorize its deduction from gross income of that year. The statute obviously does not contemplate and the regulations (article 144) forbid the deduction of losses resulting from the mere fluctuation in value of property owned by the taxpayer. New York Ins. Co. v. Edwards, 271 U.S. 109, 116, 46 S.Ct. 436, 70 L. Ed. 859, cf. Miles v. Safe Deposit Company, 259 U.S. 247, 42 S.Ct. 483, 66 L. Ed. 923. But with equal certainty they do contemplate the deduction from gross income of losses, which are fixed by identifiable events, such as the sale of property (articles 141, 144), or caused by its destruction or physical injury (articles 141, 142, 143), or, in the case of debts, by the occurrence of such events as prevent their collection (article 151).
"The transaction evidencing the loss here was the seizure of the property of the German company. The loss resulted to the respondent because it was a creditor and stockholder of that company which, as a result of the sequestration, was left without property or assets of any kind."
Undoubtedly a sale of property is an identifiable event, more conclusive, perhaps, than anything else could be. This is not to say, however, that in the case of real estate it is the only possible identifiable event which can fix and determine a loss. Under the uncontradicted evidence in this case, the property became valueless as soon as the court order was entered fixing the assessment. The taxpayer, applying an eminently practical test, and exercising a reasonable business judgment, concluded that his investment was wholly lost, abandoned the land, and wrote it off as worthless. The history of the lands in the Bitter Root Valley as disclosed by the evidence confirms his judgment. About this there can be no doubt. From every practical viewpoint the order of the Montana court determined the matter. The land was thereafter worthless. We see no distinction in law between a loss suffered on real estate from one suffered on personal property if and when value becomes "finally extinct." Royal Packing Co. v. Comr., 22 F.2d 536 (C. C. A. 9); DeLoss v. Comr., 28 F.2d 803 (C. C. A. 2); Deeds v. Comr. 47 F.2d 695 (C. C. A. 6).
Judgment below is affirmed.