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bad debt of $3,640. Petitioners had not included the $3,640
amount in income in any prior year.
Petitioners’ 1994 return was due April 15, 1995. They
applied for and got an extension to file their 1995 return on
August 15, 1996. Petitioners filed their 1994 return 14 months
late, on June 19, 1996. They filed their 1995 return 4 months
late, on December 12, 1996.
Respondent determined that petitioners had income of
$145,346 for 1994 and $93,680 for 1995 using the bank deposits
method. Petitioners agreed to all of the adjustments relating to
unreported income and overstated deductions made by respondent,
except for the addition to tax for late filing and the accuracy-
related penalty for negligence.
OPINION
A. Whether Petitioners Had Reasonable Cause for Their Failure
To File Timely Returns for 1994 and 1995
Section 6651(a)(1) imposes an addition to tax for failure
to file a tax return unless the taxpayer shows that the failure
to file is due to reasonable cause and not due to willful
neglect. See United States v. Boyle, 469 U.S. 241, 245 (1985);
Baldwin v. Commissioner, 84 T.C. 859, 870 (1985). To prove
reasonable cause, a taxpayer must show that he or she exercised
ordinary business care and prudence but nevertheless could not
file the return when it was due. See Crocker v. Commissioner, 92
T.C. 899, 913 (1989); sec. 301.6651-1(c)(1), Proced. & Admin.
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