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authority has been shown to support petitioners’ deductions and
failure to report income from various sources.
We hold, to the extent that an understatement exists,
petitioners are liable for the addition to tax under section
6661(a) for 1986 and the accuracy-related penalty pursuant to
section 6662(a) and (b)(2) for 1989. For 1989, a single penalty
of 20 percent is imposed under section 6662 though the
underpayment for that year is attributable to both negligence and
substantial understatement.
I. Failure To Timely File Their Return
Respondent determined that petitioners are liable for an
addition to tax for the failure to timely file a return. Section
6651(a)(1) imposes an addition to tax for failure to file a
timely income tax return. Petitioners bear the burden of showing
respondent’s determination to be in error and that there was
reasonable cause for their failure to timely file. Rule 142(a).
Petitioners' 1986 and 1989 Federal income tax returns were
filed during July 1988 and October 1990, respectively.
Petitioners contend that they did not file because they were
unable to pay the income tax due in both taxable years due to
“insufficient funds”. Petitioners have not demonstrated that
their lack of funds was a reasonable cause for their failure to
timely file. Therefore, to the extent of any tax required to be
shown, which was not shown, petitioners are liable for the
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