- 22 -
conclude that MIC's payment of these amounts qualifies as an
ordinary and necessary business expense under section 162. The
expense was ordinary and necessary mainly because it bore a
reasonable and proximate relation to MIC's business. See
Trust of Bingham v. Commissioner, 325 U.S. 365, 370 (1945); see
also Commissioner v. Tellier, 383 U.S. 687, 689 (1966); Deputy v.
Du Pont, 308 U.S. 488, 495 (1940). We do not sustain
respondent's determination on this issue.
Respondent also determined additions to tax under section
6651(a)(1), asserting that MIC and Beverly failed to file timely
Federal income tax returns. The record clearly establishes that
MIC's 1989 and 1990 Forms 1120 were filed untimely, as was
Beverly's 1988 Form 1120. Thus, in order to avoid these
additions to tax, MIC and Beverly must each prove that its
failure to file timely was: (1) Due to reasonable cause and
(2) not due to willful neglect. Sec. 6651(a); Rule 142(a);
United States v. Boyle, 469 U.S. 241, 245 (1985); Catalano v.
Commissioner, 81 T.C. 8 (1983), affd without published opinion
sub nom. Knoll v. Commissioner, 735 F.2d 1370 (9th Cir. 1984).
A failure to file timely is due to reasonable cause if the
taxpayer exercised ordinary business care and prudence, and,
nevertheless, was unable to file the return within the prescribed
time. Sec. 301.6651-1(c)(1), Proced. & Admin. Regs. Willful
neglect means a conscious, intentional failure, or reckless
indifference. United States v. Boyle, supra at 245.
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