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benefit rule. The $2,290,469 petitioner deducted on her amended
1988 return went from the trust, to the IRS, to the estate, to
petitioner, and back to the trust. Petitioner and the trust parted
with no money; consequently, it would be inconsistent to permit
petitioner to retain the benefit of the $2,290,469 deduction when
that amount was refunded to her. See, e.g., Frederick v.
Commissioner, supra. Further, we are mindful that respondent’s tax
benefit analysis is consistent with the September 1992 agreement
that the trust had been a grantor trust since its inception, as
reflected on the 1988 amended returns for the trust and petitioner.
Accordingly, we hold that the $2,290,469 refunded constitutes
income to petitioner pursuant to the tax-benefit rule for her 1992
tax year.
Issue 2. Section 6651(a) Addition to Tax
We now address whether the imposition of the section 6651(a)
addition to tax for failure to timely file a return is herein
appropriate. The section 6651(a) addition to tax can be avoided if
the taxpayer’s failure to file was: (1) Due to reasonable cause,
and (2) not due to willful neglect. See sec. 6651(a); Rule 142(a);
United States v. Boyle, 469 U.S. 241, 245-246 (1985); United States
v. Nordbrock, 38 F.3d 440 (9th Cir. 1994). “Reasonable cause”
requires a taxpayer to demonstrate that he exercised ordinary
business care and prudence and was nevertheless unable to file a
return within the prescribed time. See United States v. Boyle,
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