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Nothing in the record indicates that petitioners used the
Corona property or their Schedule C activities to derive personal
pleasure or recreation. Consequently, this factor weighs in favor
of finding a profit motive.
To conclude, after giving due consideration to the record as
a whole, we find that during the years in issue, petitioners did
not carry on their Schedule C activities with an intent to make a
profit. Accordingly, we sustain respondent’s disallowance of
petitioners’ Schedule C losses.
Section 6662(a) Accuracy-Related Penalty
We next consider whether petitioners are liable for the
section 6662(a) accuracy-related penalties for the years in issue.
Section 6662 imposes a penalty equal to 20 percent of any
portion of an underpayment of tax that is attributable to
negligence or disregard of rules or regulations or to a substantial
understatement of tax. See sec. 6662(a), (b)(1), and (b)(2).
“Negligence” includes any failure of the taxpayer to make a
reasonable attempt to comply with the provisions of the Internal
Revenue Code, and “disregard” includes any careless, reckless, or
intentional disregard of the Internal Revenue Code or its rules or
regulations. Sec. 6662(c). The accuracy-related penalty will be
imposed unless the taxpayers can demonstrate that they acted in
good faith and with reasonable cause with respect to the
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