You need to install Trac (the engine) in one location, and to create a
Trac environment (that is, the database and related files) in
*another* directory

A common scenario is to install Trac in the site-packages directory:
/usr/lib/python2.5/site-packages/trac

and to create a Trac environment in the /var tree:
trac-admin /var/trac/project initenv

It appears that you've installed the engine in /v/trac and that you
are attempting to create the environment in the very same directory

HTH,
Manu

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