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not operate the activity in a businesslike manner. While the
activity, in theory, could have turned a profit had petitioners
hit the lottery with a million-dollar horse, petitioners’
prospect for doing so with their existing horses was negligible.
The evidence simply is insufficient to convince us that
petitioners were motivated primarily by profit during the years
at issue. The evidence is more consistent with the conclusion
that petitioners enjoyed breeding and showing their horses and,
therefore, were willing to sustain continuing losses despite the
improbability of profits. Cf. Dreicer v. Commissioner, 78 T.C.
at 646.
We hold that petitioners’ horse activity during the years
at issue in this case was not engaged in for profit within the
meaning of section 183(c).
II. Whether Petitioners Are Liable for the Section 6662 Penalty
The only remaining issue is the applicability of the
accuracy-related penalty for negligence during the years at
issue. Section 6662 imposes an accuracy-related penalty in the
amount of 20 percent of any portion of an underpayment
attributable to negligence or disregard of rules and regulations.
See sec. 6662(a) and (b)(1). “Negligence” is defined in section
6662(c) as “any failure to make a reasonable attempt to comply
with the provisions of this title”. See also Freytag v.
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