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1231 gain, that loss and gain are treated as ordinary loss and
gain, respectively. As pertinent here, the terms "section 1231
gain" and "section 1231 loss" are defined to include any gain and
loss, respectively, that is recognized on the sale or exchange of
property used in a trade or business. Sec. 1231(a)(3). As
relevant here, section 1231(b)(1) generally defines the term
"property used in the trade or business" to include property used
in the trade or business of a character that is subject to the
allowance for depreciation under section 167 and that is held for
more than one year. As pertinent here, section 167(a) permits a
depreciation deduction for property that is used in a trade or
business.
We have found that petitioners have failed to establish that
during 1993 petitioner engaged in his automobile repair activity
with the requisite profit objective under section 183. On the
record before us, we find that petitioners have failed to show
that petitioner's Ferrari was used in a trade or business. We
sustain respondent's determination in the notice that for 1993
petitioners are not entitled to a $3,000 capital loss deduction
for the loss that they realized on the sale of petitioner's
Ferrari,6 and we reject petitioners' contention that they are
6 Mr. Grenville-Jones testified that Ferrari automobiles
generally appreciate in value, particularly where the owner keeps
(continued...)
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