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Rule 142(a). Petitioners failed to present evidence
demonstrating that they exercised reasonable care in determining
their tax liability for 1994. We find that petitioners are
liable for the accuracy-related penalty under section 6662(a) for
1994 for the portion of the underpayment related to their
embezzled income and disallowed itemized deductions.
Failure To File
Section 6651(a)(1) imposes an addition to tax for failure to
file a return within the date prescribed therefor, unless it is
shown that such failure is due to reasonable cause and not due to
willful neglect. The amount added to the tax under this section
is 5 percent for each month or fraction thereof during which the
return is late up to a maximum of 25 percent. See sec.
6651(a)(1).
Petitioners' 1994 return was received by respondent on
September 11, 1995, and thus was filed on that date (over 4
months late). See sec. 6072(a); Sanderling, Inc. v.
Commissioner, 67 T.C. 176, 178-179 (1976), affd. in part 571 F.2d
174 (3d Cir. 1978); Pryor v. Commissioner, T.C. Memo. 1994-287;
Grossman v. Commissioner, T.C. Memo. 1986-439. Petitioners admit
that they never filed a return for 1995.
In regard to 1994, petitioners assert that their return was
"accepted" by respondent; therefore, they should not be liable
for the addition to tax for failure to file. Petitioners'
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