Kent Jensen and Carol Jensen - Page 8

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            this stock, and that they should be entitled to claim an ordinary                         
            loss with regard thereto under section 1244.                                              
                  Generally, we treat facts as they happened, not as they                             
            could or might have happened.  See Estate of Legg v.                                      
            Commissioner, 40 B.T.A. 1074, 1076 (1939), revd. and remanded on                          
            another issue 114 F.2d 760 (4th Cir. 1940).  As respondent                                
            acknowledges, petitioners are entitled to a section 1244 ordinary                         
            loss deduction for the 10,000 shares of stock that were issued to                         
            them.  Petitioners, however, have not established their ownership                         
            of the 40,000 shares of K&C stock issued to petitioner’s father,                          
            and petitioners are not entitled to the claimed section 1244                              
            ordinary loss deduction with regard thereto.                                              
                  In order to avoid the addition to tax for late filing of a                          
            tax return, taxpayers must prove that their failure to file                               
            timely was due to reasonable cause and not to willful neglect.                            
            Sec. 6651(a); United States v. Boyle, 469 U.S. 241, 245 (1985);                           
            Catalano v. Commissioner, 81 T.C. 8 (1983), affd. without                                 
            published opinion sub nom. Knoll v. Commissioner, 735 F.2d 1370                           
            (9th Cir. 1984); sec. 301.6651-1(c)(1), Proced. & Admin. Regs.                            
                  Petitioners present no argument to refute the section                               
            6651(a) late filing addition to tax, and respondent’s                                     
            determination is sustained.                                                               
                  Under section 6662(a), a penalty is imposed equal to 20                             
            percent of the portion of the underpayment that is attributable                           
            to a substantial understatement of income tax (namely, an                                 
            understatement for a year in excess of 10 percent of the amount                           
            required to be shown on the Federal income tax return or $5,000).                         



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