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1990 joint Federal income tax return and February 28, 1992, the
day respondent received the return.
We note that even though Hurricane Hugo occurred in
September of 1989, on October 25, 1990, petitioners were able to
file their 1989 joint Federal income tax return and, in the fall
of 1991, petitioner was able to file the 1990 Federal corporate
income tax returns of Guardian Bank, Guardian Services, and
Stanford Financial. Consequently, it appears that the records
arguably destroyed by Hurricane Hugo had been reconstructed by
the fall of 1991. Petitioners, however, failed to file their
1990 joint Federal income tax return until February 28, 1992,
more than 5 months after records that petitioners needed to
complete their 1990 joint Federal income tax return apparently
had become available. Petitioners’ argument based on the
destruction of records, therefore, does not provide reasonable
cause for the untimely filing of their 1990 joint Federal income
tax return.
With respect to the accuracy-related penalty, respondent
argues that no substantial authority existed for petitioners to
use deficits in earnings and profits of Guardian Services and
Stanford Financial to reduce the subpart F income of Guardian
Bank.
If the Court concludes that petitioners' interpretation of
the chain deficit rule and petitioners' application of that rule
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