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Issue 4. Delinquency Addition to Tax and Accuracy-Related Penalty
Respondent determined the section 6651(a)(1) addition to tax
for failure to timely file a 1992 income tax return and the section
6662 accuracy-related penalty for negligence.
Section 6651(a)(1) provides for an addition to tax for failure
to file a timely return. A taxpayer may avoid the addition to tax
by establishing that the failure to file a timely return was due to
reasonable cause and not willful neglect. Rule 142(a); United
States v. Boyle, 469 U.S. 241, 245-246 (1985).
Petitioners failed to timely file their 1992 tax return. They
did not present any evidence establishing that their delinquent
filing was due to reasonable cause. Indeed, the evidence reveals
that they knew that they were required to file income tax returns
but did not do so until contacted by respondent's revenue agent.
Section 6662 imposes a penalty equal to 20 percent of the
portion of the underpayment that is attributable to negligence. In
order to avoid this penalty, petitioners must prove that they were
not negligent. Negligence is defined as the failure to exercise
the due care that a reasonable, prudent person would exercise under
similar circumstances. Zmuda v. Commissioner, 731 F.2d 1417, 1422
(9th Cir. 1984), affg. 79 T.C. 714 (1982); Neely v. Commissioner,
85 T.C. 934, 947 (1985).
Petitioners failed to exercise the due care that a reasonable
prudent person would have exercised by (1) failing to maintain
adequate books and records, (2) failing to report the $7,220 sales
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