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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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