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The second issue for decision is whether petitioners were
engaged in a trade or business that would allow them to deduct
the expenses of acquiring and refurbishing their muscle car
collection after the sale in 1989. Respondent disallowed certain
expenses deducted by FGI, TTI, and BEL on their respective Forms
1120S for tax years 1989, 1990, and 1991. Respondent determined
that these expenses were personal, nondeductible payments by the
corporations. Petitioners do not dispute respondent's
determination that these amounts should not have been deducted by
the corporations. Rather, petitioners argue that these expenses
are deductible by them under section 162(a) on their individual
tax returns as expenses incurred in the trade or business of
muscle cars.7
Petitioners have identified and classified certain of these
expenses that relate to the refurbishment and acquisition of
petitioners' muscle car collection during the years 1989, 1990,
and 1991. The information provided by petitioners may be
summarized on a year-by-year basis and compared to the total
amount of deductions disallowed by respondent as follows:8
7Petitioners apparently contend that the resulting increase
in distributable income from the corporations caused by the
disallowance of these deductions was then, in turn, deductible by
them on their individual income tax returns as trade or business
expenses.
8We make no finding as to the accuracy of the information
provided by petitioners. We include it merely to show the
approximate amount of expenses improperly deducted by the
corporations during the years in issue with respect to
petitioners' muscle car collection.
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