Joseph D. & Elizabeth M. Dunne - Page 47




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          (2001).  If the Commissioner makes such a showing, the burden of            
          proof is on the taxpayers to raise any issues that would negate             
          the appropriateness of the penalty, such as reasonable cause.               
          Id.  Reasonable cause exists if the taxpayers “‘exercised                   
          ordinary business care and prudence and [were] nevertheless                 
          unable to file the return within the prescribed time’.”  United             
          States v. Boyle, 469 U.S. 241, 243 (1985) (quoting sec. 301.6651-           
          1(c)(1), Proced. & Admin. Regs.).                                           
               The parties stipulated that petitioners did not timely file            
          their 1997 or 1999 Federal income tax return.  Furthermore, it is           
          undisputed that petitioners had an obligation to file income tax            
          returns for 1997 and 1999 under section 6012.  Therefore,                   
          respondent has satisfied the initial burden of producing evidence           
          to show that the addition to tax is appropriate.                            
               Petitioners assert three reasons they had reasonable cause             
          for failing to file their tax returns on time: (1) The ongoing              
          litigation between Mr. Dunne, Mr. Marcus, and FRC prevented them            
          from filing on time; (2) they did not receive Mr. Dunne’s                   
          Schedule K-1 in time; and (3) they received legal advice to                 
          exclude FRC’s income from their 1997 return.  Because the 1999              
          return contained no items that were related to FRC, only the                
          first reason may provide any reasonable cause for petitioners’              
          failure to file their 1999 tax return on time.                              








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