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indicate that the activity is not engaged in for profit. This is
especially true when there are recreational elements involved.
Id.
Mr. Dodge and his daughter were avid riders, and they
competed in horse shows. Andrea would also show horses in the
4-H Club. Petitioners derived personal pleasure from their horse
activity. As has been stated with respect to this factor:
Unquestionably, an enterprise is no less a "business"
because the entrepreneur gets satisfaction from his
work; however, where the possibility for profit is
small (given all the other factors) and the possibility
for gratification is substantial, it is clear that the
latter possibility constitutes the primary motivation
for the activity. * * * [Burger v. Commissioner, T.C.
Memo. 1985-523; fn. ref. omitted.]
Considering all of the facts and circumstances, we find that
petitioners have failed to prove that their horse-breeding
activity was engaged in for profit.
Issue 2. Accuracy-Related Penalty Under Section 6662
Respondent also determined that petitioners were negligent
and liable for penalties under section 6662(a) and (b)(1) for
each of the years because they claimed losses from the horse-
breeding activity. Section 6662(a) and (b)(1) imposes an
accuracy-related penalty equal to 20 percent of the portion of an
underpayment that is attributable to negligence or disregard of
rules or regulations. We find that petitioners were negligent in
claiming deductions for their horse-breeding activity.4
4Respondent also determined that petitioners were liable for
a sec. 6662(b)(2) penalty because their underpayment was
(continued...)
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