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under section 6662(a) for negligence or disregard of rules or
regulations under section 6662(b)(1) and for a substantial
understatement of income tax under section 6662(b)(2).
The issues for decision are: (1) Whether petitioner's horse
racing activity was an activity "not engaged in for profit" under
section 183(a), and (2) whether petitioner is liable for the
accuracy-related penalty under section 6662(a).
Some of the facts were stipulated, and those facts, with the
annexed exhibits, are so found and are incorporated herein by
reference. At the time the petition was filed, petitioner's
legal residence was Oakland, California.
Petitioner grew up near the Fairgrounds, a thoroughbred
horse racing track in New Orleans, Louisiana. His cousin, who
was a groom at the track, introduced petitioner to the grooming,
training, and racing of thoroughbred horses. Petitioner
developed a love for racehorses and fantasized of one day owning
the winning horse in the Kentucky Derby. Petitioner realized
that accomplishing such a goal would require a great deal of
capital. In the meantime, petitioner frequented different horse
racing tracks, met with trainers, and began studying horses.
In 1980, petitioner began a temporary employment business
called Allied Temporaries (Allied). Through the success of this
business, petitioner accumulated the resources necessary to begin
a horse racing activity. In 1985, petitioner obtained a license
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