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reflected in their inability to realize a profit in a meaningful
time period. Although they followed some business formalities,
they failed to plan and project a reasonable method of turning
their activity into a profitable enterprise. The facts and
evidence in this case lead us to conclude that during the years
in issue petitioners were unreasonably willing to sustain massive
losses in spite of their improbability of profits.
We further find that petitioners failed to prove that their
NAS activity was engaged in for profit. Petitioners offered very
little evidence to support their contention that the NAS activity
was maintained in a business like manner, that profits were ever
sustained, or that they had a plan to make this venture
profitable.
We hold that respondent’s disallowance of petitioners’
losses is sustained.
M. Section 6651(a)(1) Addition to Tax
Respondent determined additions to tax as a result of
petitioners’ failure to timely file their respective tax returns
for tax years 1994 and 1995. Section 6651(a)(1) imposes an
addition to tax for failure to timely file a tax return. The
addition to tax is equal to 5 percent of the amount of the tax
required to be shown on the return if the failure to file is not
for more than 1 month. Sec. 6651(a)(1). An additional 5 percent
is imposed for each month or fraction thereof in which the
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