- 8 -
we find that petitioners are entitled to claim the following
deductions on the Schedules C:
1992 1993 1994
Office Expense $458 $743 $80
Rent - machinery 2,578 1,467 - 0 -
Rent - property 10,203 11,662 7,260
Taxes - 0 - 225 - 0 -
Supplies 129 - 0 - - 0 -
Travel 12,794 - 0 - - 0 -
80 percent meals 1,482 383 - 0 -
Fuel 211 1,960 948
Car rental 3,831 5,243 6,592
Legal 308 - 0 - 67
Depreciation $167 - 0 - - 0 -
Total 32,161 21,683 14,947
B. Section 6651(a)
For each year, respondent determined that petitioners are
liable for the section 6651(a)(1) addition to tax for failure to
file a timely return. Section 6651(a)(1) provides for an
addition to tax in an amount equal to 5 percent of the amount of
the tax shown on the return for the first month, plus an
additional 5 percent for each additional month or fraction of a
month during which the failure to file continues, up to a maximum
of 25 percent of the tax in the aggregate. This addition to tax
is applicable unless the taxpayer can demonstrate that the
failure is due to a reasonable cause and not due to willful
neglect.
Petitioners agree that their return was filed late for each
year in issue. According to petitioner, the returns were not
timely filed because of an ongoing financial crisis they were
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