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Mr. Grenville-Jones relied on Internal Revenue Service (IRS)
Publication 334, Tax Guide for Small Business (Publication 334),
to prepare petitioners' 1993 Schedule C relating to petitioner's
automobile repair activity. In that schedule, petitioners
reported gross receipts of $2,100, total expenses of $23,358, and
a net loss of $21,258. Included in the $23,358 of total expenses
reported in petitioners' 1993 Schedule C was depreciation of $540
with respect to Ms. Howard's Thunderbird. Petitioners also
attached Form 4797, Sales of Business Property (Form 4797), to
their 1993 return. In that form, petitioners claimed a loss of
$13,010 on petitioner's Ferrari that they calculated by reducing
the loss realized on the sale of that automobile (i.e., $16,000)
by the depreciation that petitioners claimed with respect to it
in their 1992 Schedule C and that they claim was allowable for
January 1993. Petitioners reported that $13,010 loss as a long-
term capital loss in their 1993 Schedule D, Capital Gains and
Losses (1993 Schedule D). Petitioners did not report any other
capital gains or losses in their 1993 Schedule D. Because of the
$3,000 limitation imposed by section 1211(b) for each taxable
year on the amount of net capital loss by which an individual may
reduce income, petitioners reduced the income reported in their
1993 return by $3,000 of the claimed long-term capital loss
reported in their 1993 Schedule D.
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