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Petitioner contends that his alleged interest in Royalty
constituted an interest that was excepted from the passive
activity rules under section 469(c)(3)(A). However, there is no
evidence in the record that petitioner had an interest in
Royalty. Since we find that petitioner presented no evidence of
an interest in Royalty, we need not consider whether or not such
investment was excepted from the passive activity loss rules of
section 469.
Finally, petitioner contends that he is entitled to an
ordinary loss as a result of the abandonment of a worthless
lease.
Section 165(c)(1) allows for the deduction of a loss
incurred in a trade or business or in a transaction undertaken
for profit. A loss may arise from a permanent withdrawal of
property used in a trade or business or for the production of
income. Sec. 1.165-2(c), Income Tax Regs.
In order to be entitled to an abandonment loss, a taxpayer
must show: (1) An intention on the part of the owner to abandon
the asset, and (2) an affirmative act of abandonment. Citron v.
Commissioner, 97 T.C. 200, 208-209 (1991).
In determining a taxpayer's intent to abandon, the
subjective judgment of the taxpayer is entitled to great weight,
and the court is not justified in substituting its business
judgment for that of the taxpayer. Id. at 209 (citing A.J.
Indus. Inc. v. United States, 503 F.2d 660, 670 (9th Cir. 1974)).
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