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The $57,137 that American Valmar spent for home furnishings
delivered to the condominium also constitutes a constructive
dividend to Markovski, includable in his gross 1991 income.
V. Additions to Tax and Penalties
A. Additions to Tax for Failure To File Return
Respondent determined additions to tax against American
Valmar for each of its years in issue under section 6651(a)(1).
Section 6651(a)(1) provides that, in the case of a failure
to file an income tax return by the due date, there shall be
imposed an addition to tax for such failure of 5 percent of the
amount of tax, reduced by timely payments and credits under
section 6651(b)(1), for each month or portion thereof during
which the failure continues, not exceeding 25 percent in the
aggregate unless such failure is due to reasonable cause and not
due to willful neglect. Respondent determined that American
Valmar’s income tax return for 1991, due on September 16, 1991,
was 17 months delinquent and that its 1992 and 1993 income tax
returns, due (on account of extensions) on March 15, 1993 and
1994, respectively, were not filed until July 6, 1994, and
December 19, 1994, respectively. We have found that American
Valmar’s income tax returns for 1991 through 1993 were received
by the Internal Revenue Service on February 16, 1993, July 6,
1994, and December 19, 1994, respectively. We have done so based
on respondent’s records and the other information set forth in
our findings of fact. Petitioners’ evidence of timely filing
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