- 20 -
Proced. & Admin Regs. A taxpayer who has invested funds in
illiquid or speculative assets has not exercised ordinary
business care and prudence unless, at the time of the investment,
(1) the remainder of his assets and estimated income will be
sufficient to pay the tax, or (2) it reasonably can be foreseen
that the investment can be used to realize sufficient funds to
satisfy the tax liability. Id.
Petitioners argue they had reasonable cause for failing to
pay on time because they did not have the financial ability to
pay the taxes on time. We reject petitioners’ argument.
The 1997 net profit from petitioner’s law practice was more
than four times the tax liability shown on petitioners’ return.
Petitioners had much more than enough money in 1997 to pay their
tax liability when it was going to fall due on April 15, 1998.
Petitioners did not invest enough of the 1997 law practice
net profit in marketable form such as CDs or a savings account to
preserve the liquidity needed to pay the tax liability on time.
Any hardship petitioners would have encountered from a forced
sale of their property would have been of their own making
because they used most of the law practice net profit to pay for
the Atmore residence, to invest in illiquid timberland, and to
more than triple their previous 3 years’ charitable
contributions. They did all this over a period when they could
have instead estimated the order of magnitude of their 1997 tax
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011