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Although we cannot overlook the fact that petitioner had a
successful legal practice during the years in issue, it does
appear that petitioner spent a substantial amount of time with
his horse activity. However, these factors, particularly
standing alone, are not enough to show that petitioner engaged in
his horse activity for profit.
Finally, petitioner admitted that he received personal
pleasure and enjoyment from his horse activity but stated that he
was always in it to make money.
From this record, we conclude that petitioner did not have
an actual and honest objective of making a profit from his horse
activity. Rather, the record demonstrates that petitioner
conducted this activity as part of his way of life and at least
partly for pleasure, and he used expenses from this activity to
offset income from his law practice. Under section 183, his
horse activity was not engaged in for profit, and petitioner is
not permitted to deduct losses from his horse activity.
II. Additions to Tax
Section 6651(a)(1) imposes an addition to tax for a
taxpayer’s failure to file a required return on or before the
specified filing date, including extensions. The amount of the
liability is based upon a percentage of the tax required to be
shown on the return. Sec. 6651(a)(1). The addition to tax is
inapplicable, however, if the taxpayer’s failure to file the
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