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Whether petitioners' dog-breeding activity during the taxable
years 1990, 1991, and 1992 was engaged in for a profit; and (2)
whether any underpayment of tax is due to negligence or
intentional disregard of rules or regulations.
FINDINGS OF FACT
At all times relevant to this case petitioners were husband
and wife and resided in Los Gatos, California. They filed joint
Federal income tax returns for all 3 years at issue.
David Smith (Mr. Smith) is a medical doctor and was employed
as a vascular surgeon during the taxable years at issue at Good
Samaritan Hospital in San Jose, California. Mr. Smith generally
worked 10 hours per day, 5 days a week as a physician. In
addition, he was required to be "on-call" as a physician every
third night and every third weekend. Cheryl Smith (Mrs. Smith)
was not employed outside of petitioners’ household during the
taxable years at issue.
Mr. Smith received wages from his medical practice totaling
$289,347, $278,419, and $242,960 for the taxable years 1990,
1991, and 1992, respectively. In addition to the wages, Mr.
Smith received rental income from the leasing of medical
equipment to Good Samaritan Hospital. His net rental income was
$47,872, $51,957, and $38,405 for the taxable years 1990, 1991,
and 1992, respectively. Petitioners also owned an agricultural
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