- 81 -
Petitioners further contend, in the alternative, that Toraya
is entitled to a theft loss to the extent that its gross receipts
are increased to reflect underreported income, because the cash
was never deposited in Toraya's bank accounts and must have been
unlawfully diverted before receipt by Toraya. Respondent
contends that petitioners have presented no evidence to establish
that Toraya is entitled to a theft loss for the gross receipts
not deposited into Toraya's bank accounts but deposited into the
Takaos' bank accounts or used by them. We agree with respondent.
Accordingly, no deduction for theft losses relating to the
unreported income is allowable.
We turn now to the additions to tax and penalties for the
years in issue.
Section 6651(a)
Respondent determined that Toraya is liable for an addition
to tax for late filing under section 6651(a) for 1988, because it
failed to timely file its Federal income tax return for that
year. Petitioners contend that Toraya relied on Nakamura to
timely file its return. Respondent contends that Toraya did not
prove that the failure to timely file was due to reasonable
cause. We agree with respondent.
The record contains no explanation as to why Toraya's 1988
return was not timely filed. Petitioners have not shown that
Toraya's failure to timely file its 1988 return was due to good
faith reliance on Nakamura's erroneous advice rather than
Page: Previous 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 NextLast modified: May 25, 2011