- 47 -
(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.
Page: Previous 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 Next
Last modified: March 27, 2008