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Sec. 6662
Year Deficiency Penalty
1991 $11,611 $2,322.20
1992 16,818 3,363.60
Petitioners owned an antique store during the years in
issue. Petitioners also owned a 52-acre farm on which they bred
and trained quarter horses and held three rodeos during the years
in issue. Respondent concedes that petitioners operated the
rodeos for profit. In 1992, petitioners discontinued the horse
and rodeo undertakings1 and began to operate a craft fair. After
concessions, the issues for decision are:
1. Whether petitioners operated their antique store for
profit in 1991 and 1992. We hold that they did not.
2. Whether petitioners operated the horse and rodeo
undertakings as one activity in 1991 and 1992. We hold that they
did.
3. Whether petitioners operated their horse and rodeo
activity for profit in 1991 and 1992. We hold that they did.
4. Whether petitioners are liable for the accuracy-related
penalty for negligence under section 6662 for 1991 and 1992. We
hold that they are to the extent discussed below.
1 For purposes of sec. 183, two or more "undertakings" may
be one "activity". Sec. 1.183-1(d)(1), Income Tax Regs. We
refer to horse and rodeo "undertakings" because one of the issues
in dispute is whether they were one activity.
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