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Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
After a concession by respondent, the issues remaining for
decision are: (1) Whether petitioners are entitled to cost of
goods sold and expense deductions relating to petitioner Salvador
Chavarria’s Juarez, Mexico, used-car business and (2) whether
petitioners are liable for the section 6651(a)(1) addition to tax
for failure to file timely their 1990 and 1992 Federal income tax
returns.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioners resided in El Paso, Texas, at the time their petition
was filed.
Salvador Chavarria (petitioner), a resident alien, owned a
sole proprietorship located in Juarez, Mexico, known as Autos Oti
(Autos Oti-Juarez). Petitioner was also a 60-percent shareholder
in a Texas corporation that operated a business in El Paso,
Texas, known as Autos Oti, Inc. (Autos Oti-Texas). Both Autos
Oti-Juarez and Autos Oti-Texas were in the used-car business.
Petitioner filed Mexican income tax returns for 1990, 1991,
and 1992 that reported gross receipts, cost of goods sold, and
expenses from Autos Oti-Juarez. Petitioner’s Mexican income tax
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