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that the remainder of his assets and anticipated income
will be insufficient to pay his tax, has not exercised
ordinary business care and prudence in providing for
the payment of his tax liability. * * * A taxpayer will
be considered to have exercised ordinary business care
and prudence if he made reasonable efforts to conserve
sufficient assets in marketable form to satisfy his tax
liability and nevertheless was unable to pay all or a
portion of the tax when it became due. [Sec. 301.6651-
1(c)(1), Proced. & Admin. Regs.]
Petitioners contend that Richard was unable to return to his
former level of productivity after his surgery, thus limiting his
ability to work and earn income. Richard, however, did return to
employment in July 1999 and earned $49,067 in wages–-almost as
much as he had earned in the year before his surgery. When asked
on direct examination why petitioners had not paid their 1999 and
2000 taxes, Richard did not mention his illness. Instead, he
spoke at length about changes in the financial services industry
that had made it a “long, steady climb” for him to regain his
former income-earning potential.
From 1998 through 2000, Richard withdrew about $385,000
from his IRA; in 1999, petitioners refinanced their residential
mortgage, taking out $37,500 in proceeds. Petitioners have not
shown that they attempted to conserve these or other assets to
meet their tax obligations or that they curtailed unnecessary
expenses. To the contrary, as Richard conceded at trial: “I
pretty much did not curtail things. * * * I also used some
dollars for some frivolous things”. For example, Richard
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