114 F.3d 1193
79 A.F.T.R.2d 97-2838, 97-1 USTC  P 50,481
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.Taki N. ANAGNOSTON;  Kathleen Anagnoston, Petitioners-Appellants,v.COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
No. 95-70161.
United States Court of Appeals, Ninth Circuit.
Submitted May 7, 1997.*Decided May 23, 1997.

Before:  PREGERSON, NOONAN and KLEINFELD, Circuit Judges.


1
MEMORANDUM**


2
The Tax Court properly concluded that the sheep investment was a sham, under the standards set out in Sacks v. Commissioner, 69 F.3d 982 (9th Cir.1995).  Unlike Sacks, nonrecourse financing was used.  Risk of loss was avoided by Dr. Barbara's promise of a minimum yearly return.  Dr. Anagnoston was indifferent to the fact that some of the sheep in the investment units he bought were dead, and some were listed in both units.  Dr. Anagnoston did not show that the overall structure of the transaction was designed to produce, or could produce, real economic gain.  Keane v. Commissioner, 865 F.2d 1088, 1092 (9th Cir.1989).


3
Taxpayers failed to show that the understatement of taxes was not due to negligence, so the negligence penalty was appropriate.  See 26 U.S.C. § 6653, Collins v. Commissioner, 857 F.2d 1383, 1386 (9th Cir.1988);  Allen v. Commissioner, 925 F.2d 348, 353 (9th Cir.1989).  When he asked his accountant for advice, his accountant said "stay in the real property and medical areas," and said that the proposal "scares me" because, among other things, the "IRS can toss it out for lack of a profit motive."   Cf. Zmuda v. Commissioner, 731 F.2d 1417, 1422-23 (9th Cir.1984).


4
That the transaction was a sham establishes that it was "tax motivated" for purposes of 26 U.S.C. § 6621(c).  Erhard v. Commissioner, 46 F.3d 1470, 1479 (9th Cir.1995);  Hildebrand v. Commissioner, 967 F.2d 350, 353 (9th Cir.1992).


5
AFFIRMED.



*
 The panel unanimously finds this case suitable for decision without oral argument.  Fed.R.App.P. 34(a);  9th Cir.R. 34-4


**
 This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3


