Nada Nahhas - Page 14

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          where escrow arrangement was bona fide deferred payment agreement           
          between buyer and seller), revg. T.C. Memo. 1982-734                        
               Based on the record, the Court finds that petitioner                   
          retained an interest in the Heritage and Citibank bank accounts             
          in 2002, and therefore such income is includable in her gross               
          income.  The Court further finds that the interest income from              
          the escrow account at the Harris Community Bank is not includable           
          in petitioner’s gross income for 2002.                                      
          III.  Section 6651(a)(1) Addition to Tax                                    
               Section 6651(a)(1) imposes an addition to tax equal to 5               
          percent of the amount required to be shown as tax on a return for           
          each month or fraction thereof past the prescribed due date in              
          which the return is not filed, not to exceed a total of 25                  
          percent.  Generally, the amount of the addition to tax under                
          section 6651(a)(1) is reduced by the amount of any addition to              
          tax imposed under section 6651(a)(2) (which relates to failure to           
          pay the tax shown on a return by the prescribed date) with                  
          respect to each month in which both are otherwise applicable.               
          Sec. 6651(c)(1).                                                            
               A taxpayer may avoid the addition to tax under section                 
          6651(a)(1) if he establishes that the failure to file is due to             
          reasonable cause and not due to willful neglect.  “Reasonable               
          cause” requires the taxpayer to demonstrate that he exercised               
          ordinary business care and prudence and was nonetheless unable to           

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