An abandonment of property is not treated as a sale or exchange - an abandonment loss is an ordinary loss regardless of whether or not the abandoned asset is a capital asset.  § 1.168(i)-8 (e)(2) If an asset is disposed of by physical abandonment, loss must be recognized in the amount of the adjusted depreciable basis of the asset at the time of the abandonment.  

If I am interpreting this incorrectly, please advise.

Thank you very much!