James G. and Linda C. Jaroff - Page 11

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          and the losses reported on their income tax returns.  Certain               
          facts and circumstances relevant in determining the applicability           
          of the additions to tax and accuracy-related penalties were known           
          solely to petitioners.  Petitioners’ failure to introduce                   
          evidence solely in their possession or peculiarly within their              
          knowledge creates a negative inference that the evidence, if                
          introduced, would be unfavorable to them.  See Streber v.                   
          Commissioner, 138 F.3d 216, 221-222 (5th Cir. 1998), revg. T.C.             
          Memo. 1995-601; Shaw v. Commissioner, 27 T.C. 561, 573 (1956),              
          affd. 252 F.2d 681 (6th Cir. 1958).  While we have given careful            
          consideration to the arguments presented by petitioners’ counsel,           
          we cannot overlook the evidentiary gaps created by petitioners’             
          decision not to attend and provide testimony at their trial.                
          A.  Addition to Tax Under Section 6651(a)(1)                                
               Section 6651(a)(1) imposes an addition to tax for a                    
          taxpayer’s failure to file a required return on or before the               
          specified filing date, which is determined with consideration of            
          any extension of time for filing.  The amount of the liability is           
          based upon a percentage of the tax required to be shown on the              
          return.  Sec. 6651(a)(1).  The addition to tax is inapplicable,             
          however, if the taxpayer’s failure to file the return was due to            
          “reasonable cause and not due to willful neglect”.  Id.                     
               Generally, income tax returns made on the basis of the                 
          calendar year must be filed on or before the 15th day of April              

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