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meaning of section 1211, and the loss is ordinary.7 See Citron
v. Commissioner, 97 T.C. 200, 213-217 (1991).
Petitioners merely abandoned a worthless mineral interest.
The loss, therefore, did not arise from a "sale or exchange"
within the meaning of section 1211. Accordingly, petitioners are
entitled to ordinary loss treatment with respect to the
abandonment of Saddle Mountain during 1987.
Issue 5. Hidden Valley
Respondent determined that the $1,643,900 loss petitioners
sustained in 1989 relating to Hidden Valley is a long-term
capital loss. Petitioners assert that it is an ordinary loss.
In October 1984, petitioner purchased Hidden Valley.
Petitioner testified that he intended to construct an office
building on this property. On January 3, 1989, petitioner
surrendered, disposed of, or lost his interest in Hidden Valley
through foreclosure.
In support of their argument that the loss sustained on
Hidden Valley in 1989 is ordinary, petitioners again assert that
petitioner was engaged in a trade or business of acquiring,
developing, and selling real property and that Hidden Valley was
7 We recognize that, under certain circumstances, the
abandonment of mortgaged property can qualify as a "sale or
exchange". See, e.g., Yarbro v. Commissioner, 737 F.2d 479 (5th
Cir. 1984), affg. T.C. Memo. 1982-675; Middleton v. Commissioner,
77 T.C. 310 (1981), affd. per curiam 693 F.2d 124 (11th Cir.
1982). These conditions do not exist in the instant case.
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