T.C. Memo. 2008-204
UNITED STATES TAX COURT
WALTER KOWSH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15154-06. Filed August 28, 2008.
Walter Kowsh, pro se.
Michelle L. Maniscalco, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
KROUPA, Judge: Respondent determined an $11,846.40
deficiency in petitioner’s income tax for 2003 and a $2,376.99
addition to tax for failure to file a return timely under section
6651(a)(1),1 a $1,267.73 addition to tax for failure to pay tax
timely under section 6651(a)(2), and a $272.75 addition to tax
for failure to pay estimated tax under section 6654. After
1
All section references are to the Internal Revenue Code in
effect for 2003, the year at issue, unless otherwise specified.
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concessions,2 the remaining issues for decision3 are whether
petitioner’s depression caused by his wife’s untimely death at
age 53 and the September 11, 2001 attacks (September 11 attacks)
on the World Trade Center qualifies as a disability for purposes
of the 10-percent additional tax on his pension distribution
under section 72(t) and qualifies as reasonable cause for his
failure to file a timely return, timely pay taxes, and pay
estimated tax. We hold that petitioner’s depression does not
qualify as a disability under section 72(t) or as reasonable
cause for purposes of the additions to tax.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the accompanying exhibits are
incorporated by this reference. Petitioner resided in New York
at the time he filed the petition.
Background
Petitioner’s wife died an untimely death from thyroid cancer
at age 53 in June 2001, leaving petitioner responsible for her
aged mother and petitioner’s two teenage children. Petitioner
managed six employees, overseeing day-to-day operation of a large
2
The parties stipulated, after petitioner eventually filed
the return for 2003, to petitioner’s items of income, loss,
exemptions, credits, and self-employment tax.
3
Petitioner claimed a $3,000 deduction for tuition and
related fees to send his children to Catholic school. Petitioner
failed to substantiate these expenses at trial, however. In
addition, petitioner admits that he paid the amounts to a private
middle or high school, not to a post-secondary institution. See
secs. 25A, 222. We therefore find that petitioner is not
entitled to the deduction.
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computer system at Deutsche Bank at the time his wife died and at
the time of the September 11 attacks on the World Trade Center
near the Deutsche Bank building. Petitioner lost a number of
friends and neighbors in the September 11 attacks, including
three or four people who had attended his wife’s funeral.
By February 2002, petitioner’s depression from his wife’s
death and the September 11 attacks became so severe that
petitioner could no longer go to work. Petitioner also suffered
from sleep apnea that caused him to have narcoleptic episodes and
fall asleep. The Human Resource Department at Deutsche Bank
instructed petitioner to seek aid through the Bank’s employee
assistance program, which he did.
Petitioner was given medication for depression and anxiety
attacks. Petitioner testified that he took Wellbutrin, Lexapro,
Ativan and Paxil, commonly known antidepressants and/or anti
anxiety medications, but petitioner was unable to specify when he
took any of the medications. Moreover, petitioner failed to
provide any affidavits or testimony from any medical
professionals regarding any illnesses. Petitioner failed to
provide any reports or letters from doctors despite numerous
requests from respondent. In addition, his doctor was unwilling
to provide any certification that petitioner was disabled.
Petitioner received both short-term and long-term disability
payments through his disability insurance policy with a private
insurer. Petitioner provided no evidence that he applied for or
received Social Security disability benefits.
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Petitioner did not file an income tax return for 2003, which
was due on April 15, 2004. Respondent prepared a substitute for
return with information from petitioner’s third-party payors and
issued a deficiency notice to petitioner. Petitioner timely
filed a petition and petitioner subsequently, in February 2008,
prepared a proposed return. We must decide his liability for the
section 72(t) additional tax and the additions to tax under
section 6651(a)(1) and (2) and section 6654. Petitioner argues
that his depression qualifies as a disability for purposes of the
10-percent additional tax on his pension distribution under
section 72(t) and qualifies as reasonable cause for his failure
to file a return timely, to pay taxes timely and to pay estimated
tax.
OPINION
We are asked to decide whether petitioner’s depression
constituted a disability to absolve petitioner from the 10-
percent additional tax on an early distribution under section
72(t) and whether such disability constitutes reasonable cause to
absolve petitioner from the additions to tax. Respondent
stipulates that petitioner received short-term and long-term
disability payments through an insurance carrier. Respondent
argues, however, that disability for insurance purposes does not
establish that petitioner was disabled within the meaning of
section 72(t)4 or for purposes of establishing reasonable cause
4
Petitioner concedes that he received a $332 distribution
from a qualified retirement plan during the year at issue.
(continued...)
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for his failure to file a return, to pay the tax due, and to pay
the estimated tax. We agree.
Early Distribution From Pension Account
We first address whether petitioner is liable for the 10-
percent additional tax on early distributions under section
72(t). Section 72(t)(1) imposes a 10-percent additional tax on
the amount of an early distribution from a qualified retirement
account. Section 72(t)(2) provides for certain exceptions to the
imposition of this 10-percent additional tax. One such exception
is a distribution attributable to an individual’s being
“disabled.” Sec. 72(t)(2)(A)(iii). An individual is “disabled”
for this purpose if he or she “is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected
to result in death or to be of long-continued and indefinite
duration.” Sec. 72(m)(7). An individual seeking to benefit from
the exception must provide proof of his or her disability. Id.
Petitioner argues that the depression he suffered due to his
wife’s early death and the September 11 attacks caused him to be
totally “disabled.” Petitioner offered no documentary evidence
to corroborate his depression or anxiety, however. In addition,
no doctors testified nor did petitioner provide any affidavits
from medical professionals. No doctor was willing to certify
4
(...continued)
Petitioner fails to dispute that, if the distribution was not
attributable to his being disabled within the meaning of sec.
72(t)(2)(A)(iii), he qualifies for none of the other exceptions
of sec. 72(t)(2).
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that petitioner was disabled. We find that petitioner’s
uncorroborated testimony does not establish that he was
“disabled” for section 72(m)(7) purposes. Moreover, we agree
with respondent that qualifying for disability insurance is not
dispositive in determining whether an individual is disabled for
purposes of the 10-percent additional tax under section 72(t).
Thus, petitioner is liable for the 10-percent additional tax
under section 72(t) that applies to the pension distribution
petitioner received in 2003.
Additions to Tax for Failure To File and Pay Timely
We next address whether petitioner’s failure to file a
timely return and to timely pay the tax was due to reasonable
cause. Petitioner admits that he failed to file the return
timely and pay the correct amount of tax. Petitioner argues,
however, that his depression and sleep apnea constitute
reasonable cause.
Section 6651(a)(1) provides for an addition to tax for
failure to timely file a tax return on or before the specified
filing date, and section 6651(a)(2) provides for an addition to
tax for failure to timely pay the tax due. The additions to tax
under section 6651 do not apply, however, if the failure to
timely file or timely pay is due to reasonable cause and not to
willful neglect. United States v. Boyle, 469 U.S. 241, 245
(1985). Petitioner has the burden of proof with respect to
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defenses to the additions to tax under section 6651.5 See Higbee
v. Commissioner, 116 T.C. 438, 446 (2001). To satisfy this
burden, a taxpayer must show that he or she exercised ordinary
business care and prudence but was nevertheless unable to file
the return within the prescribed time. Crocker v. Commissioner,
92 T.C. 899, 913 (1989); sec. 301.6651-1(c)(1), Proced. & Admin.
Regs. A taxpayer may have reasonable cause for failure to timely
file a return where the taxpayer experiences an illness or
incapacity that prevents the taxpayer from filing his or her
return. See, e.g., Estate of Kirchner v. Commissioner, 46 B.T.A.
578, 585 (1942); Carnahan v. Commissioner, T.C. Memo. 1994-163,
affd. without published opinion 70 F.3d 637 (D.C. Cir. 1995);
Jones v. Commissioner, T.C. Memo. 1988-542; Harris v.
Commissioner, T.C. Memo. 1969-49. We do not find that
petitioner’s depression and sleep apnea incapacitated him to such
an extent that he was unable to file the return and pay the
proper amount of taxes for 2003. Petitioner offered no evidence
to corroborate his accounts of depression or anxiety. No doctors
testified nor did petitioner provide any affidavits from medical
professionals. Petitioner failed to meet his burden of proving
5
The Commissioner bears the burden of proving with respect
to sec. 6651(a)(2) that he prepared a substitute for return that
properly estimated the amount of tax due and fulfilled the
requirements of sec. 6020(b). Wheeler v. Commissioner, 127 T.C.
200, 208-210 (2006), affd. 521 F.3d 1289 (10th Cir. 2008). Both
parties concede that respondent has met his burden. The
Commissioner has the burden to produce evidence that the return
was filed late in respect of sec. 6651(a)(1). Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001). Petitioner admits
that he failed to file the return timely.
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reasonable cause for his failure to timely file the return and
pay the proper amount of taxes.
Moreover, petitioner’s failure to timely file continued for
years beyond the due date of the return. We have held in similar
situations that there is no reasonable cause for a delay in
filing beyond the term of the taxpayer’s illness. See, e.g.,
Ramirez v. Commissioner, T.C. Memo. 2005-179; Black v.
Commissioner, T.C. Memo. 2002-307, affd. 94 Fed. Appx. 968 (3d
Cir. 2004); Wright v. Commissioner, T.C. Memo. 1998-224.
Petitioner’s depression and anxiety admittedly affected him
during a portion of 2001, and likely for some time thereafter.
The return for 2003 remained unfiled, however, for almost 5 years
from its due date and was filed only in preparation for trial in
February 2008. We find that petitioner’s illness does not
constitute reasonable cause for his failure to timely file a
return and pay the proper amount of taxes.
In sum, petitioner has not shown that his failure to timely
file an income tax return for 2003 and pay the proper amount of
tax was due to reasonable cause and not to willful neglect.
Thus, we find that petitioner is liable for the additions to tax
under section 6651(a)(1) and (2).
Estimated Tax Addition
Respondent also determined petitioner was liable for an
addition to tax under section 6654(a) for failure to make
estimated tax payments for 2003. Section 6654(a) imposes an
addition to tax where a taxpayer underpays estimated tax. The
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estimated tax addition is mandatory unless a statutory exception
in section 6654(e) applies. See Recklitis v. Commissioner, 91
T.C. 874, 913 (1988); Grosshandler v. Commissioner, 75 T.C. 1,
20-21 (1980); see also Estate of Ruben v. Commissioner, 33 T.C.
1071, 1072 (1960) (reasonable cause and lack of willful neglect
are not relevant considerations for estimated tax addition).
Notwithstanding the lack of reasonable cause, respondent
must produce evidence sufficient for us to conclude that
petitioner had a required annual payment under section
6654(d)(1)(B) (relating to tax liability for the preceding tax
year) to determine whether one of the exceptions applies. See
Wheeler v. Commissioner, 127 T.C. 200, 210-212 (2006), affd. 521
F.3d 1289 (10th Cir. 2008). The record reflects that petitioner
had $1,044 withheld towards his tax liability for 2003, and
petitioner made no estimated tax payments for 2003. The record
fails to reflect, however, whether petitioner filed a return for
the preceeding tax year, 2002, and, if so, what petitioner’s
liability was for that year. We therefore conclude that
respondent failed to produce the requisite evidence, and thus
petitioner is not liable for the addition to tax under section
6654(a) for underpaying estimated tax for 2003.
To reflect the foregoing and the concessions of the parties,
Decision will be entered
under Rule 155.