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entry under the heading "Trust A B & C (February Close)"
indicating $89,119 interest on La Playa and $1,477 interest on
Blue Grass, for a total of $90,596 during the fiscal year ended
February 28, 1985. Additionally, there is a journal entry in the
trusts' books which indicate the trusts acquired ownership of the
mortgages as part of the estate's "partial debt settlement".
Since we conclude that the trusts were the true owners of the
mortgages, Trust C had mortgage interest for the taxable year
ended February 28, 1985, of $27,179, 30 percent of $90,596. This
amount is includable in Trust C's DNI for its taxable year ended
February 28, 1985.
B. Addition to Tax Under Section 6651(a)
Respondent determined an addition to tax under section
6651(a) for petitioner's 1985 taxable year. In order to avoid
this addition to tax, petitioner must prove that his failure to
file was: (1) Due to reasonable cause and (2) not due to willful
neglect. Sec. 6651(a); Rule 142(a); In re Stanford, 979 F.2d
1511, 1512 (11th Cir. 1992); Buelow v. Commissioner, 970 F.2d
412, 415 (7th Cir. 1992), affg. T.C. Memo. 1990-219; In re
American Biomaterials Corp., 954 F.2d 919, 922 (3d Cir. 1992);
Stovall v. Commissioner, 762 F.2d 891, 895 (11th Cir. 1985),
affg. T.C. Memo. 1983-450; United States v. Boyle, 469 U.S. 241,
245 (1985); Fleming v. United States, 648 F.2d 1122, 1124 (7th
Cir. 1981). A failure to file a timely Federal income tax return
is due to reasonable cause if the taxpayer exercised ordinary
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