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check. Petitioners had paid only $12,000 through withholding
toward their 1989 tax liability when the request for extension
was filed. Petitioners’ 1989 return, postmarked October 15,
1990, reported adjusted gross income of $268,689.71 and a total
tax liability of $59,903.15, with petitioners owing $47,903.15.
After audits of Babb & Hanna’s and petitioners’ Federal
income tax returns, petitioners agreed to assessment and
collection of respondent’s proposed deficiencies in the amounts
of $8,257.40, $16,749.05, and $37,965.82 for 1987, 1988, and
1989, respectively. These deficiencies arose from petitioners’
mischaracterization of petitioners’ personal expenses that were
paid by Babb & Hanna as business expenses. The computations of
the additions to tax and penalty that respondent determined are
based on the liabilities assessed by the agreement.
OPINION
Section 6651(a)(1)
Respondent determined that petitioners are liable for the
section 6651(a) addition to tax for 1987, 1988, and 1989.
Section 6651(a)(1) imposes an addition to tax for failure to file
timely a return, unless the taxpayer establishes that the failure
did not result from “willful neglect” and that the failure was
due to “reasonable cause”. “Willful neglect” has been
interpreted to mean a conscious, intentional failure or reckless
indifference. United States v. Boyle, 469 U.S. 241, 245-246
(1985). “Reasonable cause” requires the taxpayers to demonstrate
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