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actual objective of making a profit. We therefore overrule
respondent's adjustments to petitioners' and Mr. Perry's
tax for the years in issue.
We note that on the basis of the section 183 adjust-
ments to petitioners' returns, respondent also disallowed
the casualty and theft loss deductions claimed by
petitioners in 1986 and by Mr. Perry in 1987 because the
section 183 adjustments increased petitioners' and
Mr. Perry's adjusted gross income in those years and had
the effect of decreasing the amount of the casualty losses
that could be claimed. See sec. 165(c)(3), (h)(2).
Respondent does not dispute that petitioners suffered the
casualty losses claimed in 1986 and 1987. Therefore, by
reason of the fact that we have not sustained respondent as
to the section 183 adjustments discussed above, there is no
basis to adjust the casualty and theft losses claimed by
petitioners.
Additions to Tax and Penalty
Respondent determined that petitioners are liable for
the additions to tax for negligence prescribed by sections
6653(a)(1)(A) and (B) and 6653(a)(1) with respect to their
1986 and 1988 returns, and that Mr. Perry is liable for
the additions to tax for negligence prescribed by section
6653(a)(1)(A) and (B) with respect to his 1987 return.
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