AMW Investments, Inc. - Page 24

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               xii.  Conclusion                                                       
               Based on the above, we conclude that petitioner may not                
          deduct the $160,000 that it claimed as an interest expense paid             
          to Mr. Mohney.6                                                             
          3.  Section 6651                                                            
               Respondent determined additions to tax under section                   
          6651(a)(1), asserting that petitioner failed to file timely                 
          Federal income tax returns.  In order to avoid this addition to             
          tax, petitioner must 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).                     
          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.                        

               6 Even if we were to assume arguendo that Mr. Mohney and               
          petitioner had intended to establish a debtor-creditor                      
          relationship ab initio, the record reveals that the character of            
          that debt, as debt, vanished before the subject years and was               
          equity during those years.  See Green Leaf Ventures, Inc. v.                
          Commissioner, T.C. Memo. 1995-155; Frazier v. Commissioner,                 
          T.C. Memo. 1975-220.                                                        

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