John S. Evans and Sue A. Evans v. Commissioner of Internal Revenue

BEAM, Circuit Judge.

John S. Evans and Sue A. Evans 1 appeal the tax court’s determination that John Evans’ partnership, Heartbeat Associates, was not engaged in activities for the purpose of making a profit, a violation of 26 U.S.C. § 183 (1982 & Supp. IV 1986). 2 The taxpayers also appeal the tax court’s imposition of a penalty interest rate for a “tax motivated transaction” pursuant to 26 U.S.C. § 6621(c) (1982 & Supp. IV 1986). We reverse.

I. BACKGROUND

John and Sue Evans filed joint federal income- tax returns for the years 1977 through 1980. John Evans became a limited partner in Heartbeat…