Clarence A. Hunt, Jr. - Page 7

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            Petitioner acknowledged at trial that "I didn't have any success                              
            at all."  However, he produced no evidence to show that he                                    
            changed the manner in which he operated his activity in order to                              
            make the activity profitable.  It is quite evident that                                       
            petitioner derived tremendous pleasure from the activity.  He had                             
            a great love for horses and fantasized winning the Kentucky                                   
            Derby.  Despite that fantasy, however, he failed to conduct the                               
            activity with an intent that, at some realistic point, it would                               
            attain a profitable status.  Respondent, therefore, is sustained                              
            on this issue.                                                                                
                  The next issue is whether petitioner is liable for the                                  
            addition to tax under section 6662(a).  Section 6662(a) provides                              
            that, if that section is applicable to any portion of an                                      
            underpayment in taxes, there shall be added to the tax an amount                              
            equal to 20 percent of the portion of the underpayment to which                               
            section 6662 applies.  Under section 6664(c), no penalty shall be                             
            imposed under section 6662(a) with respect to any portion of an                               
            underpayment if it is shown that there was a reasonable cause,                                
            and that the taxpayer acted in good faith with respect to the                                 
                  Section 6662(b)(1) provides that section 6662 shall apply to                            
            any underpayment attributable to negligence or disregard of rules                             
            or regulations.  Negligence is defined as lack of due care or                                 
            failure to do what a reasonable and ordinarily prudent person                                 

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