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Closing Statement lists $9,717 of selling expenses which are to
be deducted from the $103,970 figure to reach a net capital gain
of $94,253. Thus, the capital gain adjustment is $95,710
($94,253 + $1,457). This can be reflected in the Rule 155
computation.
Under section 7491(c), respondent has the burden of
production in any court proceeding with respect to the liability
of any individual for any penalty or addition to tax. Section
6651(a)(1) imposes an addition to tax for failure to file a
return on time. The addition equals 5 percent for each month
that the return is late, not to exceed 25 percent. The addition
to tax under section 6651(a)(1) is imposed unless the taxpayer
establishes that the failure was due to reasonable cause and not
willful neglect. “Reasonable cause” requires a taxpayer to
demonstrate that he or she exercised ordinary business care and
prudence. United States v. Boyle, 469 U.S. 241, 246 (1985).
Willful neglect is defined as a “conscious, intentional failure
or reckless indifference.” Id. at 245.
Petitioners’ return was untimely filed on March 15, 1996,
and bore a signature date of April 6, 1996. The return was due
on April 15, 1994. At trial, petitioner admitted the 1993 return
was filed in 1996. Petitioner claimed that he had financial
difficulties to the point of filing a bankruptcy proceeding.
Petitioner’s unfortunate personal and financial circumstances do
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