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personal injury client.
Other than his own testimony, petitioner presented no
evidence that the $35,789 received from Mr. Tolpin for
petitioner’s percentage of the legal fees recovered was for
“goodwill” and therefore entitled to capital gains treatment.
This was merely a fee-splitting arrangement between two
attorneys.
On this record, we find that petitioner mischaracterized the
$35,789 as capital gains on his return. We conclude that the
$35,789 received by petitioner was ordinary income subject to
self-employment tax. Accordingly, we sustain respondent’s
determination on this issue.
Section 6651(a)(1) imposes an addition to tax for failure to
timely file a tax return, unless failure to do so is due to
reasonable cause and not willful neglect. The taxpayer must
prove both reasonable cause and lack of willful neglect. Crocker
v. Commissioner, 92 T.C. 899, 912 (1989). “Reasonable cause”
requires the taxpayer to demonstrate that he exercised ordinary
business care and prudence. United States v. Boyle, 469 U.S.
241, 246 (1985). Willful neglect is defined as a “conscious,
intentional failure or reckless indifference.” Id. at 245.
Because petitioner stipulated that he filed his 1998 tax
return on October 15, 2002, respondent has met his burden of
production with respect to the addition to tax under section
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