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of proving otherwise. Rule 142(a); Welch v. Helvering, 290 U.S.
111, 115 (1933). Section 61(a) includes in gross income all
income from whatever source derived, including gross income
derived from business. Sec. 61(a)(2).
Petitioners have shown, and respondent has conceded, that
they are entitled to deduct $114,394 in business expenses, and we
so find.
Section 6651(a)(1) imposes an addition to tax for failure to
file a timely return, unless the taxpayer establishes: (1) The
failure did not result from willful neglect, and (2) the failure
was due to reasonable cause. Petitioners did not offer any
reason for the late filing of their return. Therefore,
respondent’s determination is sustained.
Next we consider whether petitioners are liable for a
negligence penalty under section 6662(a). The penalty amounts to
20 percent of the portion of the underpayment attributable to
negligence. Respondent determined that the entire underpayment
is due to negligence. We agree.
"Negligence" includes any failure to make a reasonable
attempt to comply with the Internal Revenue Code. Sec. 6662(c).
Petitioner failed to report $183,585 in income. In response
to a question from the Court, he testified that he was trying to
operate his business out of a trust in order to avoid taxes, but
that he "did not do it correctly". He apparently believed that
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