James J. McCarron III and Michelle McCarron - Page 17

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          notice of deficiency.  The result is that petitioners' adjusted             
          gross income for 1993, 1994, and 1995 increased by $43,165,                 
          $38,547, and $26,230, respectively.  These adjusted gross income            
          amounts exceed the earned income credit phaseout amounts.  The              
          Court holds, therefore, that petitioners are not entitled to                
          earned income credits for 1993, 1994, and 1995.                             
          C.  Additions to Tax and Penalties                                          
               1.  Addition to Tax Under Section 6651(a)(1)                           
               Section 6651(a)(1) imposes an addition to tax for failure to           
          file a timely tax return.  The addition to tax is equal to 5                
          percent of the amount of the tax required to be shown on the                
          return if the failure to file is not for more than 1 month.  Id.            
          An additional 5 percent is imposed for each month or fraction               
          thereof in which the failure to file continues, to a maximum of             
          25 percent of the tax.  Id.  The addition to tax is imposed on              
          the net amount due.  Sec. 6651(b).                                          
               The addition to tax is applicable unless a taxpayer                    
          establishes that the failure to file was due to reasonable cause            
          and not willful neglect.  Sec. 6651(a).  If a taxpayer exercised            
          ordinary business care and prudence and was nonetheless unable to           
          file the return by the date prescribed by law, then reasonable              
          cause exists.  Sec. 301.6651-1(c)(1), Proced. & Admin. Regs.  To            
          prove reasonable cause, a taxpayer must show that he exercised              
          ordinary business care and prudence but nevertheless could not              






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