In re Assessment of Taxes, Pacific Guano & Fertilizer Co.

OPINION OF THE COURT BY HARTWELL, J. We are unable to regard this loss' as one which occurred during the year 1903, when it was written off on the books of the tax-payer. The guano had not depreciated in value; none of it had been lost. It did not exist to the extent supposed at the time of the purchase. The income from collecting and selling ceased when the deposits were removed. The loss which was finally ascertained upon the termination of that business did not occur at the time when it was learned that the guano supply had failed, but it occurred when the purchase money was paid. The transaction may be compared to the purchase of timber land on a supposition that it contained a larger amount of timber trees than upon examination it is found to contain. The annual income from getting out and selling lumber from the land, as long as there was any to get out, continued and was profitable in like manner as it would .have been if the estimate of trees had been correct. The income ceased when the trees were taken off, but the loss was made at the time of the purchase. If the purchase price had been based on the actual and not on the supposed condition of the property there would have been no loss and the annual income from the business as long as it continued could not have been affected by the length of time that it could be carried on. In one sense a loss is made at the time when one learns that he has not got what he thought he had. In another sense, and as we think in the meaning of the statute, there is in such case no actual loss other than results from an unfortunate investment in the outset. The decision of the tax appeal court is reversed.