Lakewood Associates, Robert G. Moore, Tax Matters Partner - Page 18

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            to the property owner.  Rather, we hold that until the Elbow Lake                         
            property is sold, abandoned, or otherwise disposed of in a                                
            completed transaction, Lakewood is not entitled to a loss                                 
            deduction.  Until such a time, it is impossible to determine                              
            accurately whether in fact Lakewood suffered a loss on the                                
            property or the amount of the loss.  Because Lakewood continued                           
            to own the property, there was not a closed and completed                                 
            transaction with regard to the Elbow Lake property in 1989 that                           
            triggered loss recognition for the $9 million decline in value.                           
                  Moreover, allowing Lakewood to deduct the diminution in                             
            value caused by land use regulations would be inconsistent with                           
            the other grounds for a loss deduction that exist under section                           
            165; i.e., abandonment and obsolescence.  Section 165 provides                            
            for a loss deduction for obsolescence of nondepreciable property                          
            used in a trade or business where the property is permanently                             
            discarded from use by the taxpayer.  Sec. 1.165-2, Income Tax                             
            Regs.  In addition, a deduction is permitted for an abandonment                           
            loss where the taxpayer intends to abandon the property and has                           
            taken an affirmative act of abandonment.  Citron v. Commissioner,                         
            97 T.C. 200, 208 (1991).  Lakewood has not permanently discarded                          
            or abandoned the Elbow Lake property.  Rather, Lakewood filed a                           
            permit application in January 1991, after the year in issue.  In                          
            1992, Lakewood renewed discussions with the Corps regarding the                           
            determination of wetlands on its property.  In 1993, Lakewood                             

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