Shigenori Kudo and Motomi Kudo, et al. - Page 82

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          reliance on him to perform Toraya's nondelegable duty to file               
          that return.  United States v. Boyle, 469 U.S. at 245; Estate of            
          La Meres v. Commissioner, 98 T.C. at 318.  Petitioners have not             
          satisfied their burden of proving that Toraya had reasonable                
          cause for not timely filing its 1988 return.  Niedringhaus v.               
          Commissioner, 99 T.C. at 220-221; Baldwin v. Commissioner, 84               
          T.C. at 870.  Accordingly, we sustain respondent's determination            
          of the addition to tax under section 6651(a) for 1988.                      
          Sections 6653(a)(1) and 6662(a)                                             
               Respondent determined that Toraya is liable for an addition            
          to tax for negligence under section 6653(a)(1) for 1988 and                 
          accuracy-related penalties for negligence under section 6662(a)             
          for 1989, 1990, and 1991.  Petitioners contend that Toraya is not           
          liable for the addition to tax or accuracy-related penalties for            
          negligence, because it relied in good faith on Nakamura to                  
          properly prepare its tax returns for the years in issue.                    
          Respondent contends that petitioners failed to prove that Toraya            
          had reasonable cause for understating its income on its returns             
          for 1988 through 1991 and that the understatements are due to               
          negligence within the meaning of sections 6653(a)(1) and                    
          6662(a)(1).  We agree with respondent.                                      
               Toraya's failure to maintain and to produce reliable records           
          of its financial transactions and taxable income supports a                 
          conclusion of negligence.  Crocker v. Commissioner, 92 T.C. at              
          917; Schroeder v. Commissioner, 40 T.C. at 34.  Moreover, Toraya            




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