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A taxpayer may elect to defer recognition of the gain to the
extent that the insurance proceeds do not exceed the cost of
qualifying property that is purchased to replace the converted
property. Sec. 1033(a)(2). A taxpayer's failure to recognize
the gain is considered an election under section 1033(a)(2).
Sec. 1.1033(a)-2(c)(2), Income Tax Regs.
Respondent alleges that Mr. Tillman should have recognized a
$34,000 gain in 1990 on account of his insurance recovery. We
agree. In 1990, he received $42,500 from Canal to cover the
theft of the 1986 Peterbilt, and he had no basis in the truck for
Federal income tax purposes. Thus, Mr. Tillman realized a
$42,500 gain. Because $8,500 of this gain is considered
deferred, due to the fact that he purchased the Mack truck in
1990, he should have recognized the remaining gain of $34,000 in
1990. He failed to do so. We hold for respondent on this issue.
6. Addition to Tax Under Sec 6651(a)(1)
Respondent determined additions to tax under section
6651(a)(1) in each year, asserting that petitioners failed to
file timely a Federal income tax return. We have found that all
of petitioners’ tax returns were filed untimely; they were filed
outside of the periods of time mentioned in section 6072(a) and
6081(a). In addition, the record does not show that any of the
untimely filings was due to reasonable cause and not due to
willful neglect. Thus, we sustain respondent’s determination
that petitioners are subject to additions to tax under section
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