Charles R. Godwin et al. - Page 19

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               c.  Failure To Pay Tax Shown on 1997 Return                            
               Petitioners did not complete making payments of the tax                
          liability shown on their 1997 return until November 24, 1999,               
          approximately 11 months after they had filed their return late.             
               The section 6651(a)(2) addition to tax for failure to pay              
          on time does not apply if the taxpayer can demonstrate that the             
          failure is due to “reasonable cause” and not willful neglect.               
               Petitioners may demonstrate reasonable cause for failure to            
          pay taxes by showing they exercised ordinary business care and              
          prudence in providing for payment of their tax liability and were           
          nevertheless either unable to pay the tax or would suffer an                
          undue hardship (as described in section 1.6161-1(b), Income Tax             
          Regs.) if they paid on the due date.  Sec. 301.6651-1(c), Proced.           
          & Admin. Regs.  Section 1.6161-1(b), Income Tax Regs., defines              
          “undue hardship” as:                                                        
               more than an inconvenience to the taxpayer.  It must                   
               appear that substantial financial loss, for example,                   
               loss due to the sale of property at a sacrifice price,                 
               will result to the taxpayer from making payment on the                 
               due date of the amount with respect to which the                       
               extension is desired.  If a market exists, the sale of                 
               property at the current market price is not ordinarily                 
               considered as resulting in an undue hardship.                          
               Penalties or additions can be avoided if reasonable efforts            
          were made to conserve funds in marketable form to provide for the           
          expected tax liability, but not if “lavish” and excessive living            
          expenses deplete the taxpayer’s funds.  Sec. 301.6651-1(c)(1),              

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