Judith A. Sanders-Castro - Page 15

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          have been willing to offset her losses by some amount when she              
          ceased participation, even if overall she never made a profit.              
               E.  Petitioner’s Financial Status                                      
               The fact that the taxpayer has substantial income from                 
          sources other than the activity in question, particularly if the            
          losses from the activity generate substantial tax benefits, may             
          indicate that the activity is not engaged in for profit.  Sec.              
          1.183–2(b)(8), Income Tax Regs.  During the taxable year 2001,              
          petitioner reported wage income of $89,831 and a Schedule C gain            
          of $5,893 from her part-time job performing contract work for               
          another attorney.  During the same year, petitioner reported                
          Schedule C losses from the horse showing and breeding activities            
          of $13,128.  Without the other income, petitioner’s family could            
          not have successfully sustained losses of approximately 13                  
          percent of their household income.                                          
               Considering all the facts and circumstances, we find that              
          petitioner’s horse showing and breeding activities were not                 
          engaged in for profit within the meaning of section 183(c).                 
          Respondent’s determination of an income tax deficiency is                   
          therefore sustained.                                                        
          2.  Addition to Tax                                                         
               Section 6651(a)(1) imposes an addition to tax for failure to           
          file a return by its due date.  The addition equals 5 percent for           
          each month or fraction thereof that the return is late, not to              





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