-16-
passed on January 31, 1990, for us to find that their ownership
preceded that date. Thus, petitioners do not qualify under
section 121(a)(2).
B. Whether Petitioners Are Liable for the Addition to Tax Under
Section 6651(a)(1) for Failure To File Timely
Section 6651(a)(1) imposes an addition to tax of up to 25
percent for failure to file timely Federal income tax returns
unless the taxpayer shows that such failure was due to reasonable
cause and not willful neglect. United States v. Boyle, 469 U.S.
241, 245 (1985). To prove "reasonable cause", a taxpayer must
show that he exercised ordinary business care and prudence and
was nevertheless unable to file the return within the prescribed
time. Crocker v. Commissioner, 92 T.C. 899, 913 (1989); sec.
301.6651-1(c)(1), Proced. & Admin. Regs.
Petitioners' 1992 return was due October 15, 1993.
Petitioners filed their 1992 return on July 25, 1994.
Petitioners argue that they had reasonable cause to file
their 1992 return late because they thought that Schmitz had
requested an extension of time to file. A failure to file is due
to reasonable cause if the taxpayers exercised ordinary business
care, but could not, nevertheless, file their return by the
deadline prescribed by law. United States v. Boyle, supra at
246; Bank of the West v. Commissioner, supra at 471.
Mr. Blanton testified that Schmitz told him that requests
for extensions had been filed. Two extensions were filed
regarding petitioners' 1992 return which extended the due date to
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