Paul E. Ballmer - Page 9

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          the return is late, not to exceed 25 percent.  Sec. 6651(a)(1).             
          The addition is imposed for the failure to file a return on time            
          unless the taxpayer establishes that the failure was due to                 
          reasonable cause and not willful neglect.  Sec. 6651(a)(1);                 
          United States v. Boyle, 469 U.S. 241, 245 (1985).                           
               Petitioner admits that he did not file a return for 2001 but           
          maintains that he had reasonable cause for not filing.                      
          Petitioner testified that he had reviewed section 104 and could             
          not find a basis for distinguishing damages for physical injuries           
          from emotional injuries.  Petitioner further testified that he              
          had reviewed the Internal Revenue Code for several years and                
          could find no provision that required him to file a return.                 
          Finally, petitioner maintains that reasonable cause is                      
          demonstrated by the D.C. Circuit’s initial conclusion that                  
          damages for emotional distress did not constitute gross income.             
               On cross-examination, petitioner admitted that he had not              
          reviewed the flush language of section 104(a), which provides               
          “emotional distress shall not be treated as a physical injury or            
          physical sickness” for purposes of excluding damages received               
          from gross income under section 104(a)(2).  Petitioner further              
          admitted that he had not sought the advice of a tax professional            
          in regard to his conclusions that no provision of the Code                  
          required him to file a return or that the damages he received               
          were not income.                                                            

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Last modified: November 10, 2007