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Section 1231 Loss
It is clear that petitioner’s original purchase of the
Feadship in 1990 and his restoration efforts during the early
1990s did not constitute a trade or business and would not
qualify his $1.93 million loss on the 1997 sale of the Feadship
for section 1231 ordinary loss treatment. Petitioners argue,
however, that the 1995, 1996, and 1997 charter activity (combined
with petitioner’s original 1990 profit objective for purchasing
the Feadship) constituted a sufficiently regular for-profit
activity that the $1.93 million claimed loss on sale of the
Feadship should qualify for section 1231 ordinary loss treatment.
On the facts of this case, certainly by 1995 and thereafter
through April of 1997, when petitioner sold the Feadship for
$1.1 million, petitioner did not have a good faith profit
objective relating either to the charter of the Feadship or to
the sale of the Feadship. During 1995, 1996, and 1997,
petitioner’s and SMSM’s objective in the charter of the Feadship
was to provide funds to offset a portion of the costs of
ownership of the Feadship.
Also, because of the lack of profit objective associated
with the charter of the Feadship, the charter activity relating
to the Feadship in 1995 through April of 1997 did not constitute
a trade or business, and the Feadship does not qualify for
treatment as trade or business property under section 1231.
Abbene v. Commissioner, T.C. Memo. 1998-330; Budin v.
Commissioner, T.C. Memo. 1994-185.
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