Albert R. Matthews - Page 14

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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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