Memorandum Findings of Fact and Opinion
STERRETT, Judge: Respondent determined a deficiency in the amount of $14,738.89 in the petitioner's Federal income tax for the taxable year 1963. Due to concessions by the petitioner the sole issue for decision is whether certain property owned by the petitioner was confiscated or expropriated by the Government of Algeria in 1963 and, if so, whether petitioner is entitled a deduction as a loss under section 1651 as a result thereof and the amount of any loss determined to be deductible.
Findings of Fact
Some of the facts were stipulated at trial and are found accordingly.
Chantoub Benichou (hereinafter referred to as petitioner) is a naturalized citizen of the United States. At the time of the filing of the petition herein he resided in Paris, France. He filed his Federal income tax return for the year 1963 with the district director of internal revenue for the Manhattan district of New York.
The petitioner was born on June 16, 1886, in Tlemcen, Algeria. During the years 1937 to 1963 the petitioner was in the export business; he was a manufacturer of children's clothing and he owned real property in Algeria and Morocco.
On November 25, 1937, the petitioner purchased at public auction property located in the canton of Montagnac, district of Tlemcen, Algeria, consisting of approximately 318 hectares of land (one hectare equals 2.47 acres). This property will be hereinafter referred to as La Tafna. At the time of purchase approximately 90 hectares were planted with American grape vines; there was a residence "for the owner," workers' quarters and a wine cellar with an 8,000 hectoliter capacity (one hectoliter equals 26.418 gallons).
The total cost of La Tafna, including land, buildings and plantings, was 2,355,980.86 old francs. This amount includes the payment of notarial and legal fees and, in general, all of the expenditures necessary to effect a closing under Algerian law. Of the total purchase price the petitioner paid 2,263,471.18 old francs in 1937 and 92,509.68 in 1938. In 1937 the official conversion rate was 29.47 old francs to one United States dollar and in 1938 the rate was 38.01 to the dollar. The total purchase price of La Tafna in United States currency was therefore $79,239.76. The petitioner was the sole owner of La Tafna.
The petitioner evolved a plan of development for La Tafna. His intention was to invest large amounts of capital in order to realize a "big profit." Toward this goal the petitioner initially hired 60 to 70 employees. Subsequently this number was expanded to approximately 160. In addition the petitioner employed Alma Dovar Baistar as an accountant in order to maintain books and records at La Tafna. When Baistar died in 1958 his duties were taken over by another accountant, Albert Sigsig. The petitioner's brothers, Simon and Joseph, were also active in the operation of La Tafna in managerial capacities. Simon oversaw the day-to-day 1157 operation of the farm, purchasing of plants and machinery and the hiring and firing of employees, while Joseph was a more general overseer. Joseph would visit the farm every week or two in order to check the books and records and to confer with the accountants and the farm manager. The petitioner himself regularly visited the farm except for the period between 1940 and 1946 when he resided in the United States and could not journey to Algeria due to the Second World War.
During the years from 1938 until 1962 the petitioner, in consequence of his plans for the development of La Tafna, made the following capital expenditures for planting, equipment and building: 1158
| Improvement | Year of Acquisition | Cost -- OldFrance | 1 ConversionFrances/Dollars | Cost --Dollars | 2 Length of Development |
| Expenditures for Planting |
| Ground Preparation for Vines (53 Hectares) | 1944-45 | 2,000,000 | 3 $119.30 | $16,764.46 |
| Planting Grape Vines (11 Hectares) | 1948 | 11,000,000 | 266.16 | 41,328.52 | 8 Years |
| Planting Grape Vines (14.5 Hectares) | 1948-49 | 56,300,000 | 4 307.58 | 183,041.81 | 8 Years |
| Planting Grape Vines (11.48 Hectares) | 1951-52 | 13,000,000 | 349.95 | 37,148.16 | 8 Years |
| Planting Grape Vines (5.3 Hectares) | 1954 | 7,000,000 | 350.00 | 20,000.00 | 8 Years |
| Planting Grape Vines (14.5 Hectares) | 1955 | 16,000,000 | 350.00 | 45,714.29 | 8 Years |
| Planting Grape Vines (10.58 Hectares) | 1961-62 | 12,000,000 | 490.00 | 24,489.80 | 8 Years |
| 47,067 Citrus Trees | 1951-61 | 200,000,000 | 5 349.95 | 571,510.22 | 8 Years |
| 40,000 Cyprus Trees | 1951-61 | 20,000,000 | 349.95 | 57,151.02 | 8 Years |
| 800 Olive Trees | 1938-39 | 1,500,000 | 40.95 | 36,630.04 | 30 Years |
| 3,000 Olive Trees | 1955-59 | 14,000,000 | 420.00 | 33,333.33 | 30 Years |
| 2,450 Almond Trees | 1957-59 | 890,000 | 490.60 | 1,814.11 | 15 Years |
| 800 Pine Trees | 1945-54 | 1,200,000 | 349.00 | 3,483.40 | 8 Years |
| 4,900 Peach, Apple, Pear Trees | 1957-60 | 3,170,000 | 490.70 | 6,460.16 | 8 Years |
| 600 Prune, Apricot, Medlar Trees | 1945-50 | 1,500,000 | 192.73 | 7,782.91 | 8 Years |
| Expenditures for Construction |
| 400 Cubic Meter Water Tank (Concrete) | 1938 | 1,200,000 | 38,01 | 31,570.64 |
| Zinc Gutter System | 1946-47 | 300,000 | 119.30 | 2,514.67 |
| Cattle Stable | 1938 | 650,000 | 38.01 | 17,100.76 |
| Wine Factory | 1938 | 5,500,000 | 38.01 | 144,698.76 |
| Wine Factory Enlargement | 1939-40 | 2,500,000 | 43.90 | 56,947.61 |
| Wine Machinery | 1939 | 3,500,000 | 43.90 | 79,726.65 |
| Manager's Dwelling | 1938 | 2,200,000 | 38.01 | 57,879.51 |
| Caretaker's Dwelling | 1939 | 1,000,000 | 43.90 | 22,779.04 |
| Loading Platform | 1939 | 150,000 | n6 43.90 | 3,416.86 |
| Water Conduit Gallery & Reservoir (Cement) | 1942-43 | 1,500,000 | 6 119.30 | 12,573.34 |
| Water Tower (Concrete & Iron) | 1947 | 1,500,000 | 119.30 | 12,573.34 |
| Cistern (Concrete) | 1947 | 800,000 | 119.30 | 6,705.78 |
| Storage Ditches (Cement) | 1948 | 200,000 | 266.16 | 751.43 |
| Workers' Dwellings | 1949 | 2,500,000 | 349.00 | 7,163.32 |
| Reservoir (Concrete) | 1949 | 1,500,000 | 349.00 | 4,297.99 |
| Piping (Steel) | 1949 | 2,000,000 | 349.00 | 5,730.66 |
| 850 Meter Road | 1950 | 800,000 | 349.90 | 2,286.37 |
| Expenditures for Construction (Continued) |
| 100,000 Liter Petroleum Tank (Cement & Metal) | 1952 | 475,000 | 7 349.95 | $1,357.34 |
| Pumping Station Floor | 1952 | 200,000 | 349.95 | 571.51 |
| Motor Pump & Installation | 1952 | 450,000 | 349.95 | 1,285.98 |
| Piping (Cast Iron) | 1952 | 50,000 | 349.95 | 142.88 |
| Electrical Transformer | 1952 | 400,000 | 349.95 | 1,143.02 |
| Pumping Station | 1955 | 1,000,000 | 350.00 | 2,857.14 |
| Telephone Installation | 1955 | 70,000 | 350.00 | 200.00 |
| Cast Iron Pipe 200 Millimeters | 1960 | 3,000,000 | 490.30 | 6,118.70 |
| Farm Bquipment |
| Hanomag Tractor | 1952 | 3,760,000 | 349.95 | 10,711.39 |
| 2 Bolinders Tractors | 1959 | 3,600,000 | 490.90 | 7,333.47 |
| Harvester (Used) | 1961 | 100,000 | 490.00 | 204.08 |
| Sprayer (Used) | 1961 | 150,000 | 490.00 | 306.12 |
| Produce |
| 1,450 Hectoliters of Wine | 1963 | 11,000,000 | 490.20 | 22,439.82 |
| Total | | | | $1,610,073.41 |
1160
All of the above items were on La Tafna in 1963. However, there were three occurrences which caused differing amounts of damage to the property. In 1947 there was a severe hailstorm which damaged approximately 5,000 square meters of roofing as well as certain plants. Joseph estimated the damage to be approximately 1,695,550 old francs or $14,212.49. In 1954 there was a flood which damaged 4,000 apple trees, 3,000 pear trees, 5,000 orange trees and an unknown quantity of cypress trees. The total loss was approximately 23,804,000 old francs or $68,011.43. Finally, in May of 1956 the Algerian rebellion began. From 1956 to 1961 there were frequent raids on La Tafna by Algerian rebels. In 1956 the farm manager was killed. The 1958 arsonists caused two fires which damaged and destroyed, among others, approximately 16.5 hectares of vines, 315 orange trees, 450 cypress trees, 30 lemon trees and 700 olive trees. Joseph estimated the crop damage to be approximately 8,912,000 old francs, 2 in addition to approximately 2,000,000 old francs damage to various farm buildings. At 1958 exchange rates the total damage would have amounted to $22,242.15.
In November of 1962 the petitioner received a bill for taxes due on the conduit of water from the Ministry of Finance, General Management of Taxation, for the period of August 10, 1962, to August 10, 1963. This bill was paid in 1962. On January 23, 1963, the petitioner's cashier paid Agricultural Social Insurance on behalf of La Tafna at Tlemcen. During 1963 the petitioner paid real estate taxes for 1963 on La Tafna to the Department of Tlemcen, Township of Montagnac.
The petitioner received an authorization to sow barley from the General Delegation of the Government in Algeria, Algerian Section of National Interprofessional Office of Cereals, dated January 30, 1963.
On or about January 11, 1961, the petitioner purchased at auction real property (hereinafter referred to as Ain Kial) located in the canton of Ain-Temouchent, Algeria, consisting of approximately 95 hectares of land of which 14 were planted with American vines, one with almond trees, and 61 with olive trees. There were two groups of buildings, the first consisting of a building with two rooms and attached stables and shed, and the second consisting of two rooms and an attached storeroom.
The total cost of Ain Kial was 18,101,029 old francs 3 or $36,940.88 at the 1961 rates of exchange, 490 old francs to the dollar.
On September 16, 1961, the petitioner leased Ain Kial to Benahmed Limane for 1/3 of Liman's grape harvest. Although the petitioner made several demands for rent from his tenant he never received any rental payments. The petitioner made claims for rent with the Prefect of Temouchent and the Prefect of Tlemcen but received nothing.
In January of 1963 the petitioner who was then residing in New York, having left Algeria before the independence of July 1, 1962, received a telegram from his brother, Simon, in Algeria. The telegram stated that Simon had been informed by the manager of La Tafna that the property had been nationalized.
After receiving this telegram the petitioner journeyed to Algeria and immediately proceeded to La Tafna. When the petitioner and Simon arrived at the farm they were met by the former caretakers, bearing machine guns. These men refused them admittance. After remaining at La Tafna for approximately a half hour the petitioner went to see the director "of all the farms which had been seized" in Montagnac. The director showed the petitioner a telegram from the Algerian Government directing the seizure of the petitioner's farm.
The petitioner then went to see the prefect, a superior of the director, who stated that he had not been told to seize La Tafna. However, despite the petitioner's entreaties no aid was offered. Petitioner also saw the Algerian vice president, who was a personal acquaintance, but no assistance was granted. He then visited the Minister of Agriculture who delegated one Madani to investigate the petitioner's claim.
It was Madani's duty to determine if the petitioner had made proper use of La Tafna. He asked the petitioner questions concerning sowing and irrigation. Subsequently, Madani informed the petitioner that he had visited La Tafna along with the director 1161 of Montagnac and that after interviewing various of the petitioner's employees it was his opinion that everything was satisfactory. However, petitioner did not receive the return of his property.
There after the petitioner directed Simon to employ Jean Emmanuel Lalande, an agricultural engineer, qualified by the Tribunal of Algeria, to report on the use and condition of La Tafna. Lalande's report, dated March 16, 1963, stated that he
proceeded with a study of accounting and administrative documents relating to the management of the farm * * * for the fiscal year 1961-1962 and up to 22 January, 1963, date of the occupation by the SAP of Montagnac and whereby consequently, he lost his rights of control.
According to this report Lalande found all at La Tafna to be in order. But this also availed the petitioner nothing.
Thereafter petitioner employed an attorney and commenced legal action in the Civil Tribunal of Tlemcen against the Algerian Government on June 1, 1963, to recover La Tafna. In that proceeding the petitioner contended that he received no decree and that the taking of his property was an act of violence. The Tribunal held that it did not have jurisdiction to decide the case and did not grant the petitioner relief.
Subsequently, the petitioner requested the aid of the United States Government in recovering his property or obtaining compensation therefor. The petitioner was notified in a letter from the Embassy of the United States dated April 23, 1965, that the Algerian Government refused to deal directly with American claimants but that a claim was to be submitted on his behalf by the embassy.
To the date of trial the petitioner has not received the return of La Tafna nor has he been compensated for its loss. Neither has the petitioner been able to achieve the return of the books and records kept at La Tafna during the period from 1937 to 1963.
Concerning his property Ain Kial, towards the end of 1963 the petitioner received a document bearing the seal of the Republic of Algeria and dated October 1, 1963, from his tenant, Benahmed Limane. This document read in pertinent part as follows:
CONSIDERING the law NR 62157 of December 31, 1962 tending to extend the rulings in force on December 31, 1962,
CONSIDERING the decree NR 63,168 of May 9, 1963 concerning the placing under the protection of the State of personal and real properties in which the mode of acquisition, management, exploitation or utilization is of a nature susceptible to trouble public order and social peace, * * *
ARTICLE 1: The agricultural exploitation belonging to Mr. Benichou Chantoub, and all the installations connected therewith, situated at Ain-Kial, are placed under the control and management of the State.
ARTICLE 2: The Secretary General of the Prefecture of Oran, the Sub-Prefect of Ain-Tremouchent, are in charge of the enforcement of this decree.
The petitioner, to the date of trial, received no compensation for Ain Kial.
Ordonnance No. 62-020 of August 24, 1962, published in the Journal Officiel de l'Etat Algerien (hereinafter referred to as Journal Officiel) of September 7, 1962, provided, in part, as follows:
[The] Prefects may * * * open and operate any establishment engaged in * * * agriculture which is not in operation and is therefore hampering local or national economic activity.
This ordinance further provided that managing directors be appointed. The ordinance also provided that the owner of a particular property could have it restored to him if certain conditions were met. The ordinance was made effective 30 days after its publication.
Decree No. 62-02 of October 22, 1962, published in the Journal Officiel of Octob 26, 1962, provided for the appointment of "Management Committees" for "unoccupied farms." This decree ordered compliance within 8 days of publication and was promulgated over the name of Ahmed Ben Bella, Prime Minister.
Decree No. 63-88 of March 18, 1963, set forth the procedures for declaring property vacant and therefore subject to state management. This decree further provided that a determination of vacancy would become final, if no appeal were made, within 2 months of the publication of a "vacancy decision."
Decree No. 63-168 of May 9, 1963, published in Journal Officiel of May 14, 1963, provided, in part, that agricultural enterprises would be placed under the "protection" of the State after an investigation by the local prefect if the "method of acquisition, management, operation, or utilization 1162 is likely to disturb law and order." Appeal from prefectural orders were to be made only within one month of publication.
On his individual Federal income tax return for 1963 the petitioner indicated that he had suffered a loss of $1,498,524 "on Algerian property confiscated by Algerian Government in January 1963 * * *." Due to his deduction of part of this loss the petitioner claimed a net loss for 1963 and accordingly reported no taxable income.
In his statutory notice the respondent stated:
(a) The deduction of $1,500,000.00 4 claimed on your 1963 income tax return as a loss resulting from the confiscation of your property in Algeria by the Algerian Government in 1963 is disallowed because you have not established that the loss was incurred in a trade or business or in a transaction entered into for profit, and that the loss was sustained in 1963 and also because you have not established the amount of the deductible loss.
Opinion
At the outset a comment must be made on the state of the record. Due to the advanced age of the petitioner, the fact that the trial was of necessity conducted through an interpreter, the fact that books, records and other documents were often unavailable and when available were in translation, our finding of the facts was made exceedingly difficult. In many instances the product of our labors may have less than the clarity and continuity we deem desirable; however, we have done our utmost with the record offered. In view of the petitioner's burden of proof it was necessary to construe any absence or ambiguity of proof against him.
This case presents the question of whether the petitioner is entitled to a loss deduction under section 165 with respect to two farms which the petitioner contends were expropriated or confiscated by the Government of Algeria in 1963. It is the respondent's position that the petitioner has failed to carry his burden of proving that an expropriation or confiscation of La Tafna and Ain Kial in fact occurred in 1963.
Section 165 provides, in pertinent part, as follows:
(a) General Rule. - There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise. * * *
(c) Limitation on Losses of Individuals. - In the case of an individual the deduction under subsection (a) shall be limited to -
(1) losses incurred in a trade or business;
(2) losses incurred in any transaction entered into for profit, though not connected with a trade or business * * * 5
In order to be deductible under section 165(a) "a loss must be evidenced by closed and completed transactions, fixed by identifiable events, and * * * actually sustained during the taxable year." Section 1.165-1(b) Income Tax Regs.; Boehm v. Commissioner, 326 U.S. 287, 292 (1945); United States v. S.S. While Dental Mfg. Co., 274 U.S. 398 (1927).
The determination of whether a loss occurred during the taxable year is purely one of fact. "Such an issue of necessity requires a practical approach, all pertinent facts and circumstances being open to inspection and consideration * * *." Boehm v. Commissioner, supra, at 292. The test is flexible, practical rather than legal. Boehm v. Commissioner, supra, at 293; Lucas v. American Code Co., 280 U.S. 445, 449 (1930); Cayetano R. Ribas, 54 T.C. 1347, June 22, 1970.
With respect to La Tafna the respondent argues, on brief, that the petitioner has failed to prove an expropriation or confiscation primarily because he did not offer an Algerian decree pursuant to which an expropriation or confiscation took place. We do not find this argument convincing. Such a decree is merely evidentiary, not an absolute prerequisite to the establishment of a loss. The respondent's own published position takes cognizance of this principle. Revenue Ruling 62-197, 1962-2 C.B. 66, 69, states in part: 1163
The burden of proof is upon the taxpayer to establish by whatever evidence is available the occurrence of the act and the date thereof to support a deduction for a loss. An officially published expropriation decree (or similar document) will in general be considered prima facie evidence of Cuban confiscation as of the date of the decree. Naturally, all other evidence which is available to the taxpayer or the Service will be used, to the extent material, in establishing loss and the date thereof.
See also Rev. Rul. 65-172, 1965-2 C.B. 49, 50.
As we have stated above the test of loss is a practical one - the loss of control or "ownership" of one's property and not necessarily loss of legal title. Rozenfeld v. Commissioner, 181 F. 2d 388, 389 (C.A. 2, 1950), affirming a Memorandum Opinion of this Court; Wyman v. United States, 166 F. Supp. 766 (Ct. Cl. 1958).
In the instant case the petitioner claims that La Tafna was expropriated or confiscated in 1963 and he has presented ample proof in support of his assertion.
In January of 1963 the petitioner, who was then residing in New York City, received a telegram from his brother, Simon, in Algeria stating that La Tafna had been expropriated. When the petitioner arrived at La Tafna and attempted to gain admittance he was met by armed men who refused him access to his property. Thereafter, the petitioner spoke with various Algerian officials on the local and national level in the attempt to secure the return of La Tafna. His efforts culminated in his bringing legal action in the Civil Tribunal of Tlemcen against the Algerian Government for the recovery of La Tafna in June of 1963. The court held that it had no jurisdiction and refused to grant the petitioner relief. By this time, at the latest, "closed and completed transactions" had occurred which were "fixed by identifiable events occurring in" the taxable year 1963. Section 1.165-1(d)(1), Income Tax Regs. If one is denied access to one's property by armed guards, is denied relief by a court, and has never been permitted since that seizure to enjoy the fruits of ownership, common sense, which should play a role in the administration of our tax laws, requires us to find that the petitioner has, indeed, suffered a loss.
The fact that in 1965 the petitioner was notified that the United States Government would file a claim in his behalf is immaterial. "The taxing act does not require the taxpayer to be an incorrigible optimist." United States v. S.S. White Dental Mfg. Co., supra, at 403.
On brief the respondent directed our attention to several factors which, it was argued, indicate that the petitioner's property was not expropriated during 1963. One of these factors upon which the respondent placed substantial emphasis was that the petitioner paid certain real estate taxes during 1963 for 1963 on La Tafna to the local prefecture. This it is claimed shows that the Algerian Government regarded the petitioner as the owner. We do not find this reasoning persuasive in view of the fact that the petitioner was dispossessed of the dominion and control of his property. In addition, it does not appear when during 1963 the petitioner paid the taxes in question. Other transactions during 1963 respecting La Tafna, i.e., payment of social insurance and the dating of an authorization to sow, occurred in January while the loss of La Tafna occurred as late as June. Finally, the payment of taxes may have been an adjunct of the possession of legal title. As we stated above we are not as concerned with title as with the concept of ownership in the practical sense of the word.
Towards the end of the trial of this case the respondent offered into evidence four ordinances and decrees promulgated by the Algerian Government. In his reply brief the respondent argues that these decrees govern the use and possession of property by Algerian citizens, but not until 1964, 1965 and 1966 did decrees appear which purported to "nationalize" various industries. Although we feel that the respondent's conclusions are subject to question, and in view of our opinion that restriction of use and possession may be sufficient to give rise to a loss we do not deem it necessary to launch into a discussion of Algerian law. Suffice it to say, that it is well recognized that property may be expropriated by actual seizure before the effective date of an official decree. 6 See 1164 James Speyer, 30 B.T.A. 517, 524, et seq. (1934), affirmed 77 F. 2d 824 (C.A. 2, 1935). The fact that an effective decree is promulgated concerns the legality of the seizure and not whether the seizure itself gives rise to a loss for income tax purposes. Once the taxpayer's use and possession is so restricted as to amount to an expropriation it becomes immaterial that the restriction was illegal under the laws of the restricting nation. Rozenfeld v. Commissioner, supra, at 389; Wyman v. United States, supra, at 770. A decree may be a mere formality. Harry J. Colish, 48 T.C. 711, 716 (1967).
With respect to the petitioner's property, Ain Kial, the situation is in reverse. The petitioner presented the Court with a decree, albeit received from the petitioner's tenant farmer, which stated that Ain Kial was thereby "placed under the control and management of the State." The respondent argues that this decree is insufficient to show that the petitioner's property was expropriated or confiscated. We disagree.
As was the case with the expropriation or confiscation of La Tafna the determination concerning Ain Kial is purely factual. The decree along with the fact that the petitioner lost dominion and control of his property and was left without realistic expectation of recompense convinces us that Ain Kial was taken by the Algerian Government.
On brief the respondent raises the fact that the petitioner failed to offer testimony concerning Algerian law, and cites Bernhard Altmann, 20 T.C. 236 (1953), vacated and remanded on other grounds in an unpublished order ( C.A. 2, 1955, 55-2 USTC 9599, 48 AFTR 1867); and Havana Electric Railway, Light and Power Co., 29 B.T.A. 1151 (1934), for the proposition that expert testimony may be necessary to resolve doubts as to the effect of foreign decrees. It is true that such expert testimony is admissible to throw light on ambiguous decrees; however, we can find no authority which indicates that such evidence is required. The decree in the within case is clear as to its effect on its face. The decree along with the petitioner's testimony adequately carries the petitioner's burden of proof. As we set forth in our findings of fact the decree bore the seal of the Republic of Algeria, was dated October 1, 1963, and stated, in part:
ARTICLE 1: The agricultural exploitation belonging to Mr. Benichou Chantoub, and all the installations connected therewith, situated at Ain-Kial, are placed under the control and management of the State. 7
From this clear language there can be no doubt that the decree was self-executing and effective as of its date. In view of the fact that the petitioner never regained dominion and control of his property nor received any rent for its use it appears that the requisite "closed and completed transactions * * * fixed by identifiable events * * *," section 1.165-1(d), Income Tax Regs., occurred during 1963, giving rise to a loss.
The respondent in his arguments concerning both La Tafna and Ain Kial discussed many cases of this and other courts. Some of these cases we have mentioned above; we found these to be more favorable to the petitioner's cause than the respondent's. 8
Others of these cases we find to be distinguishable. 9 The case at bar necessitates 1165 a factual determination and, as is frequently the situation in such cases, prior decisions are of minimal value. Each decision must turn on the facts and circumstances of the case under consideration.
The remainder of the cases cited by the respondent concern instances in which petitioners have failed to carry their burdens of proof. 10 For the reasons given heretofore in this opinion we find these cases inapposite.
We must now turn to the second facet of this case; i.e., the determination of the amount of the petitioner's deduction. Section 165(b) provides as follows:
(b) Amount of Deduction. - For purposes of subsection (a), the basis for determining the amount of the deduction for any loss shall be the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition of property.
Section 1011 refers to section 1012 which provides for a cost basis. In this case the petitioner's cost basis must be adjusted by an increase in the amount of any capital improvements that he made and decreased by the amount of depreciation that was allowed or allowable during the years from 1937 to 1963 11 assuming the straight-line method had been used.