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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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