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business. The fact that he actively engaged in real estate
activities throughout this period, we believe, shows that his
financial difficulties did not prevent him from filing their 1987
tax return on time. We find that petitioners' failure to timely
file the 1987 return was not due to reasonable cause. Therefore,
we find that they are liable for the addition to tax under
section 6651(a)(1) for 1987.
Respondent argues that, despite petitioners' personal
problems resulting from Antonino's tragic illness and death,
petitioner husband was not ill and was able to carry on his
business activities in 1989. We disagree. Petitioners' son had
heart surgery in April 1990, around the time that their 1989
return was due to be filed. He was hospitalized until late July.
Petitioners were at the hospital with him continuously during
these 4 months. Petitioners' son died in August 1990, and they
filed their 1989 return in October 1990. We are convinced by
these facts that petitioners' late filing of their 1989 return
was due to reasonable cause and not willful neglect. We hold
that they are not liable for the addition to tax under section
6651 for 1989.
b. Negligence
Respondent determined that petitioners are liable for the
addition to tax for negligence under section 6653(a)(1)(A) and
(B) for 1987, and under section 6653(a)(1) for 1988, and the
negligence penalty under section 6662(b)(1) for 1989.
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