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Section 6012(a)(1)(A) further delineates that an individual
is required to file a tax return for any year in which his or her
gross income exceeds the sum of the applicable exemption amount
and standard deduction for such taxpayer. In this context, gross
income includes “Gross income derived from business”, sec.
61(a)(2), which in turn is defined as “total sales, less the cost
of goods sold,” plus certain other items, sec. 1.61-3(a), Income
Tax Regs. Business expenses, as distinct from cost of goods
sold, are not subtracted in ascertaining gross business income.
Id.
Here, petitioner did not file tax returns for 1986, 1988,
1989, 1990, 1991, and 1992 until October of 1998. Such returns
were untimely by a large margin. See sec. 6072(a). Furthermore,
the returns, even as filed, reflect substantial gross income
derived from Bicycle Sport and thus clearly place petitioner over
the filing threshold.
Petitioner, however, has fallen far short of establishing
reasonable cause for his repeated failure to file timely tax
returns. Other than vague references to loss of records and
perhaps the misguided belief that he owed no taxes, petitioner
has not offered any explanation for his delinquency. We
therefore hold that petitioner is liable for the section
6651(a)(1) addition to tax for each of the taxable years at
issue.
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