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Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993); Wilcox v.
Commissioner, 848 F.2d 1007 (9th Cir. 1988), affg. T.C. Memo. 1987-
225; Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984). Suffice
to say, section 61(a)(1) and (a)(4) includes in the definition of
“gross income” (i.e., income that is subject to Federal income tax)
compensation for services rendered and interest, respectively; and
pursuant to the so-called “tax benefit rule”, State income tax
refunds are taxable if the amount of the tax refund was deducted in
a prior year and such deduction resulted in a reduction of tax for
that year. See sec. 111.
We therefore sustain respondent’s tax deficiency
determinations for 1997, 1998, and 1999. We now turn our attention
to the additions to tax for failure to file a tax return and pay
tax. Sec. 6651(a)(1) and (2).
Section 6651(a)(1) imposes an addition to tax for failure to
timely file a return. Petitioner can avoid the section 6651(a)(1)
addition to tax by proving that his failure to file was: (1) Due
to reasonable cause, and (2) not due to willful neglect. Sec.
6651(a)(1); 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.
United States v. Boyle, supra at 246; sec. 301.6651-1(c)(1),
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