- 33 -
business expenses and depreciation in excess of income.
Consequently, Mr. Abbene's distributive share of Blue Ribbon's
operating losses is zero.
Finally, we turn our attention to the section 1231 loss
claimed by Blue Ribbon on its 1991 Form 1120S and by petitioners
on their 1991 joint Federal income tax return. The loss in issue
arose out of the destruction of Magic Moment, Mr. Abbene's horse.
Section 1231 permits deductions for losses sustained from the
sale or exchange of property used in a trade or business. To be
engaged in a trade or business, the taxpayer must engage in an
activity with continuity and with the primary purpose of
realizing income or a profit from it. Sec. 162; Commissioner v.
Groetzinger, 480 U.S. 23, 35 (1987). Because Blue Ribbon did not
engage in the horse-related activities with the requisite profit
motive, the horse was not property used in a trade or business.
See Budin v. Commissioner, T.C. Memo. 1994-185. Accordingly, we
sustain respondent’s determination on this issue.
We have considered the parties' remaining arguments and
conclude that the arguments are either without merit or
unnecessary to reach.
To reflect the foregoing,
Decision will be entered
for respondent.
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