William F. Middleton - Page 14




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         business deductions, that failure, on this record, does not rise             
         to the level of being fraudulent.                                            
               Accordingly, we hold that respondent has failed to show by             
         clear and convincing evidence that petitioner is liable for the              
         75-percent fraud penalty under section 6663(a).                              

         IV.  Is Petitioner Liable for the Failure to File Penalty for                
         Taxable Year 1991?                                                           
               Section 6651(a)(1) provides for an addition to tax of 5                
         percent of the tax required to be shown on a return for each                 
         month or fraction thereof for which there is a failure to file,              
         not to exceed 25 percent.  A taxpayer may avoid this addition to             
         tax if it can be shown (1) that the failure did not result from              
         willful neglect, and (2) that the failure was due to reasonable              
         cause.  See United States v. Boyle, 469 U.S. 241, 245 (1985).                
               Here, petitioner does not deny that he failed to file his              
         1991 income tax return until 1994.  The circumstances in which               
         petitioner found himself when the 1991 return was due (April 15,             
         1992) were precarious; i.e., petitioner had been indicted for                
         Medicaid fraud and he had failed to report his business income in            
         returns filed for 1989 and 1990.  Accordingly, although                      
         petitioner has provided a reason for intentionally failing to                
         file, he has not provided a reason for which his failure to file             
         can be excused.                                                              
               Accordingly, we hold that petitioner is liable for a 25                
         percent section 6651 addition to tax for 1991.                               




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