- 31 -
Petitioners also claim that petitioner transferred $16,000
in accounts receivable to JJM. Petitioner was a cash basis
taxpayer. A cash basis taxpayer has a zero basis in accounts
receivable. Raich v. Commissioner, 46 T.C. 604, 610 (1966); see
also P.A. Birren & Son v. Commissioner, 116 F.2d 718, 720 (7th
Cir. 1940). Therefore, petitioner's contribution of the accounts
receivable has no effect on his basis in JJM. After
consideration of all of the evidence, we conclude that
petitioner's basis in JJM was $21,000.
Finally, section 301(c)(3) treats the amount of the
distribution, not treated as a dividend, to the extent it exceeds
basis, as gain from the sale or exchange of property. This
calculation we leave to the parties under Rule 155.
Issue 3. Additions to Tax and Penalty
(a) Section 6651(a)(1)--All Petitioners
Section 6651(a)(1) provides, in the case of failure to file
a return by the due date, that the taxpayer is subject to an
addition to tax in the amount of 5 percent of the tax for each
month, or fraction thereof, that the delinquency continues (not
to exceed 25 percent), unless it is shown that such failure is
due to reasonable cause and not willful neglect.
Petitioners' 1989 joint individual income tax return was due
April 15, 1990. Sec. 6072(a). On August 30, 1990, the Internal
Revenue Service received the individual petitioners' 1989 joint
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