T.C. Summary Opinion 2002-50
UNITED STATES TAX COURT
CARL L. RICHEY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15679-99S. Filed May 9, 2002.
Carl L. Richey, pro se.
John Aletta, for respondent.
DINAN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority. Unless otherwise indicated,
subsequent section references are to the Internal Revenue Code in
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effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
Respondent determined the following deficiencies and
additions to tax with respect to petitioner’s Federal income
taxes:
Additions to Tax
Taxable Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6651(a)(2) 6654(a)
1995 $5,881 $682 ---- $148
1996 6,483 767 $409 165
After concessions, the sole issue remaining for decision is
whether petitioner is liable for the various additions to tax
determined by respondent.1
Some of the facts have been stipulated and are so found.
The stipulations of fact and the attached exhibits are
incorporated herein by this reference. Petitioner resided in
Verbank, New York, on the date the petition was filed in this
case.
Petitioner suffered from prostate cancer and received
medical treatments relating thereto starting in 1990. In 1995,
1
Petitioner concedes all other adjustments in the statutory
notices of deficiency. The parties stipulated to certain items
of income received by petitioner. With one exception, this
income is reflected in the notices of deficiency. The exception
is a State income tax refund of $131 which is includable in
petitioner’s gross income in 1995. In addition, respondent
concedes that petitioner is entitled to deductions not reflected
in the notices--to alimony deductions of $7,700 for 1995 and
$18,800 for 1996, and to deductions (subject to the adjusted
gross income limitation of sec. 213(a)) for medical expenses of
$9,284 in 1995 and $11,460 in 1996.
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petitioner contracted Lyme disease, which required two operations
in 1998 and 1999. Petitioner currently suffers from lung cancer
and is undergoing chemotherapy.
During 1995 and 1996, petitioner received numerous medical
treatments, including psychiatric treatment, acupuncture, and
drug therapy, related to his treatment for Lyme disease.
However, during this time petitioner continued his employment as
a manager of a hunting and fishing club and continued to operate
a small kennel business related to his employment. Petitioner
divorced and remarried during 1996. After his remarriage,
petitioner’s wife was involved with at least a portion of
petitioner’s finances, including making mortgage payments.
With assistance from his accountant, petitioner requested
and received extensions of time to file both his 1995 and 1996
tax returns until October 15 of the years 1996 and 1997 for each
respective return. However, he did not file the returns until
October 14 and 18, 1999, respectively. Prior to petitioner’s
filing the returns, respondent had already prepared a substitute
return for each year on March 5, 1999, and issued the statutory
notice of deficiency for each year on July 21, 1999.
We first address whether petitioner is liable for the
section 6651(a)(1) and (2) additions to tax for failure to file a
return and pay the tax shown thereon. Paragraph (1) of section
6651(a) imposes an addition to tax for failure to file a timely
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return. This addition to tax equals 5 percent of the amount
required to be shown as tax on the return for each month, or
fraction thereof, during which the failure to file continues, up
to a maximum of 25 percent. Sec. 6651(a)(1). For purposes of
computing the addition to tax, the amount required to be shown on
the return is reduced by the amount of any credit against the tax
which may be claimed on the return, and by the amount of the tax
which is paid on or before the date prescribed for payment of the
tax. Sec. 6651(b)(1).
Paragraph (2) of section 6651(a) imposes an addition to tax
for failure to pay the amount of tax shown on a return in a
timely manner. This addition to tax equals 0.5 percent of the
amount shown as tax on the return for each month, or fraction
thereof, during which the failure to pay continues, up to a
maximum of 25 percent. Sec. 6651(a)(2). For taxable years for
which a return is due after July 30, 1996 (without regard to
extensions), if a taxpayer fails to file a return the paragraph
(2) addition to tax may be calculated based upon the tax shown on
the substitute return prepared by the Secretary pursuant to
section 6020(b). Sec. 6651(g)(2); Taxpayer Bill of Rights 2,
Pub. L. 104-168, sec. 1301(b), 110 Stat. 1475 (1996). For
purposes of computing the addition to tax for any given month,
the amount of tax on the return is reduced by the amount of any
credit against the tax which may be claimed on the return, and by
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the amount of the tax which is paid on or before such month.
Sec. 6651(b)(2).
The amount of the addition to tax under paragraph (1)
generally is reduced by the amount of the addition to tax under
paragraph (2) with respect to each month in which both are
otherwise applicable. Sec. 6651(c)(1).
A taxpayer may avoid the additions to tax under one or both
paragraphs if he establishes that the failure to file and/or pay
is due to reasonable cause and not due to willful neglect. Sec.
6651(a)(1) and (2). “Reasonable cause” requires the taxpayer to
demonstrate that he exercised ordinary business care and prudence
and was nonetheless unable to file a return within the prescribed
time. United States v. Boyle, 469 U.S. 241, 246 (1985).
“Willful neglect” means a conscious, intentional failure or
reckless indifference. Id. at 245.
Petitioner filed returns for taxable years 1995 and 1996 in
October 1999, after respondent had already prepared a substitute
return and issued a notice of deficiency for each year.
Petitioner testified that during the relevant time period, he was
in and out of the hospital and “didn’t know where I was at, what
I was doing.” However, at the same time petitioner was divorced
and remarried, and was able to continue his employment as well as
operate a small business. Petitioner also was able to request
extensions of time to file his tax returns for both 1995 and
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1996. Furthermore, petitioner’s wife was available to assist
petitioner with his finances for at least a portion of the time,
and petitioner also had an accountant available who helped him
request the extensions of time to file. Consequently, while we
are sympathetic of petitioner’s situation, we find that he did
not have reasonable cause for failing to file timely his 1995 and
1996 Federal income tax returns and to pay the tax shown on the
1996 substitute return. We sustain respondent’s determination
that petitioner is liable for the additions to tax under section
6651(a)(1) and (2). The correct amounts of the additions to tax
must be calculated in the Rule 155 computations required in this
case.
We next address whether petitioner is liable for the section
6654(a) addition to tax for failure to make estimated Federal
income tax payments for 1995 and 1996. Unless the taxpayer
demonstrates that one of the statutory exceptions applies,
imposition of the section 6654(a) addition to tax is mandatory
where prepayments of tax, either through withholding or by making
estimated quarterly tax payments during the course of the taxable
year, do not equal the percentage of total liability required
under the statute. See sec. 6654(a); Niedringhaus v.
Commissioner, 99 T.C. 202, 222 (1992).
Petitioner did not address this issue separately from the
section 6651(a) issue. However, there is no “reasonable cause”
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exception for the section 6654(a) addition to tax similar to that
for the section 6651(a) additions to tax. Nothing in the record
indicates petitioner made the required amount of estimated tax
payments for taxable years 1995 and 1996, and petitioner does not
argue, and the record does not indicate, that any of the
statutory exceptions apply. We sustain respondent’s
determination that petitioner is liable for the additions to tax
under section 6654(a). The applicability of the additions to tax
after concessions, and the correct amounts thereof, must be
calculated in the Rule 155 computations required in this case.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
under Rule 155.