James W. Yarbro and Mary E. Yarbro v. Commissioner of Internal Revenue Service

JOHN R. BROWN, Circuit Judge:

This case presents the question of whether an individual taxpayer’s loss resulting from the abandonment of unimproved real estate subject to a non-recourse mortgage exceeding the market value is an ordinary loss or a capital loss. Because the Commissioner may change an earlier interpretation of the law to another reasonable interpretation, we affirm the Tax Court’s holding that an abandonment of real property subject to non-recourse debt is a “sale or exchange” for purposes of determining whether a loss is a capital loss.

Facts

James W. Yarbro (Taxpayer) 1 has been…