T.C. Memo. 1996-162
UNITED STATES TAX COURT
MARK MASSINGILL AND INDRA MASSINGILL, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19193-94. Filed March 28, 1996.
Mark and Indra Massingill, pro sese.
David W. Sorenson, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GERBER, Judge: Respondent determined a $11,006 deficiency
in petitioners’ 1990 Federal income tax. Respondent also
determined an addition to tax under section 6651(a)(1)1 of $1,917
and an accuracy-related penalty under section 6662(a) of $1,390.
1
All section references are to the Internal Revenue Code in
effect for the year at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
2
After concessions, the issues remaining for our consideration
are: (1) Whether, in 1990, petitioners were engaged in an
activity for profit pursuant to section 183(a); and (2) whether
petitioners are liable for the addition to tax under 6651(a)(1)
for 1990.2
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioners resided in Modesto, California, at the time the
petition in this case was filed. Mark Massingill (petitioner) is
an individual proprietor who, at various times, has engaged in
engineering and metal mining and refining activities. These
activities included, but were not limited to: The engineering
and fabrication of industrial controls and laboratory
instruments; recovering, refining, and selling mercury; testing
and examining mineral properties; and miscellaneous researching
and developing. The activity in question (metal mining and
refining) does not involve the employment of individuals other
than petitioner.
Petitioner developed his knowledge of the metal mining and
refining field from an interest that began in his childhood. He
possessed a rock collection upon which he performed chemical
analyses of minerals and ore specimens. Petitioner fabricated
his own chemicals such as nitric and hydrochloric acids in order
2
Respondent has conceded that the sec. 6662(a) penalty is
not applicable in this case.
3
to perform these experiments. In high school, petitioner studied
chemistry. In college, petitioner majored in chemistry,
mathematics, and physics. Petitioner also had performed some
electrical engineering course work. Subsequently, petitioner
terminated his college education in order to work full time as an
electrical technician. Later, petitioner independently started a
part-time business entailing the purchase of laboratory
instruments at U.S. Government surplus sales. Then, he
reconditioned and resold these items to laboratories.
In March 1977, petitioner began working full time on his own
behalf. His desire at that time was to be "self-employed" in
order to do technical research and development. Petitioner would
engineer, fabricate and service controls for industrial fine
equipment. These operations were petitioner’s primary income
during 1977 and 1978.
In 1979, petitioner began to experiment with recovering
mercury from scrap batteries obtained from the U.S. General
Services Administration and U.S. Department of Defense (DOD)
surplus sales. Petitioner was spurred by the fact that in 1978
the price of mercury increased in the New York commodities market
from slightly more than $1 a pound to close to $3 a pound. In
past years, the price of mercury had been close to $1 dollar a
pound. The surplus scrap batteries purchased ranged from watch
batteries to 20-pound batteries. Petitioner developed a
technique to extract and refine mercury from scrap batteries and
4
put the resulting solution in bottles. Petitioner sold the
reclaimed mercury to individuals and entities in the gold mining
industry for use in extracting the metal from ores. Sometime in
1980, petitioner began experiencing competition from an
individual who was also recovering mercury from batteries. The
competitor obtained batteries from the same sources as
petitioner. By 1981, petitioner’s primary source of income was
the recovery and sale of purified mercury directly to users.
Sometime in 1982, the State of California imposed hazardous
waste regulations that rendered scrap battery processing
impractical for petitioner. In 1983, the California Department
of Health Services Toxic Substances Control Program (DHS) began
requiring the DOD to deliver mercury only to a California
hazardous waste permitted facility. Petitioner was not able to
obtain a hazardous waste facility permit which would have
required extensive engineering documentation, and prohibitively
high hazardous and environmental insurance. Hence, it was
impractical for petitioner to proceed with mercury reclamation
from scrap batteries because of the costs associated with a
hazardous waste facility permit. Nevertheless, petitioner
attempted to continue in the mercury business, with sources other
than batteries, until he ultimately ceased selling mercury on May
31, 1988.
In 1983, in response to petitioner’s cessation of the
activity of extracting mercury from batteries, petitioner’s wife
5
began outside employment. Petitioner’s wife was employed full
time as an assistant controller in a local television station
from 1983 to 1990. Subsequently, she became the controller for
that station. Before 1983, petitioner and his wife relied upon
income from petitioner’s mercury extraction activity as their
sole source of income. After 1983, Mrs. Massingill’s income
became the source of petitioners’ daily living expenses.
Furthermore, from 1984 to 1988, the reclamation of mercury
was not petitioner’s sole activity. Petitioner continued to
perform industrial instrumentation and control, as well as a
variety of research and development projects. Petitioner began
doing test extractions of metals from ores and minerals, as well
as the examination of properties, and performing amalgamation
assays. However, during those years, the recovery of mercury
from sources other than scrap batteries continued to be the
primary activity for petitioner.
Petitioner advertised mercury for sale in a periodical
called the "California Mining Journal". Sometime in 1982,
petitioner prepared a prospectus and attended a trade show for
the gold mining industry, involving both hobby and commercial
interests. The prospectus explained petitioner’s sale policies
to prospective clients. It was distributed by "Massingill
Metals" and includes petitioner’s phone number, address and
business hours. It states that any quantity of mercury may be
ordered, although clients are cautioned that some large orders
6
may require additional time. The material also incorporates
information on suggested uses for mercury in refining processes
such as amalgamating gold or recovering gold from ores. The
amount and the grade of mercury to be supplied determined the
prices quoted by petitioner. The document states that base
prices for mercury on the west coast were related to, but not
necessarily governed by, the New York and German markets' spot
price. In 1985, petitioner incorporated within his sales
material procedures for dealing with a mercury spill, along with
other general health and safety hazard information.
On January 16, 1985, in response to a complaint alleging the
illegal storage, disposal and transportation of hazardous waste,
DHS conducted an inspection of petitioner’s shop and work
premises. After several inspections, DHS alleged that petitioner
violated environmental regulations. DHS alleged that paints,
thinners, solvents, oils, mercury batteries, acids, and caustics
were haphazardly stored in and around a large barn which
comprised petitioner’s work area. Large amounts of toxic ash
generated by petitioner’s reclamation of mercury were allegedly
also found on site. DHS alleged that these quantities of "army
surplus salvage" were a threat to public health and the
environment. On December 30, 1987, DHS served petitioner with a
remedial action order (RAO). The RAO provided that petitioner
was to perform certain enumerated remedial actions, and failure
to comply would result in DHS commencing proceedings to clean up
7
the site. Petitioner would be liable for all direct and indirect
costs associated with DHS cleaning up the site itself.
In 1988, petitioner and DHS engaged in an exchange of
letters in which petitioner sought administrative relief which,
ultimately, was denied. DHS subsequently found petitioner’s
efforts at compliance to be unsatisfactory. On June 28, 1988,
DHS informed petitioner that he was not in compliance with the
RAO, and that DHS would be instituting cleanup procedures of the
property. On December 26, 1989, DHS informed petitioner that a
contractor would be commencing inventory activities of "hazardous
substances" at the work site on January 15, 1990. Actual
inventory was performed sometime in the summer of 1990.
Petitioner was informed in a letter dated July 11, 1990, that the
inventory was complete. Petitioner was further informed that
hazardous substances in allegedly deteriorated containers would
be packaged and disposed of. On August 15, 1990, DHS obtained a
court order to enter the property and commence cleanup
operations. Sometime after that date, DHS’s contractor seized
the allegedly hazardous materials located in petitioner’s work
area.
In 1990, petitioner spent approximately 6 months addressing
issues raised by DHS. He intended to mitigate damage to his
activities, preserve his assets, and ultimately resume work
without interference from DHS. Petitioner spent the first 2
months of the year filling out an inventory of the materials
8
stored in his work area. Petitioner corresponded with DHS in
order to secure information and obtain administrative relief.
Petitioner also consulted with attorneys in the matter. After
the seizure of the materials by DHS, petitioner expended money to
erect a fence on the property pursuant to DHS’s specifications.
This measure was intended to restrict public access to the
allegedly hazardous materials still present at the property.
Petitioner spent several hundred dollars in efforts to comply
with DHS’s requirements by over packing materials. Petitioner
also spent approximately 1 month in 1990 fabricating equipment
for customers. He worked on a prototype device that was a waste
water cleaning machine. With a pressure washer, the device was
intended to remove oils from contaminated water. Petitioner also
had other projects for which he had orders. The remainder of the
time was spent on general maintenance and shop housekeeping. For
example, on August 17, 1990, petitioner placed zinc bearing
residue on the ground for weed control. Other such maintenance
activities included the cleaning, painting, and lubrication of
machinery, disassembly of apparatus for recovery of components,
and storage organization of parts and supplies.
Petitioner maintained a contemporaneous daily record of his
activities during 1987 and 1988, until August 1988. At that
time, for personal reasons, petitioner ceased recording the
information in the logs. Petitioner partially resumed
maintenance of the journal in 1989, and with more detail in 1990.
9
This journal is simply a bound collection of notebook lined
paper. The days, month, and year are individually handwritten.
The record itself indicates the month on top of the paper, and
shows the days per line on the sheet of paper. The last two
digits of the year are inscribed in the upper left-hand corner of
the paper. Many of the entries consist of unexplained
abbreviations. The handwriting is consistent, with no deviation
in writing style, throughout all of the daily record. The record
is not overly detailed, and it appears that petitioner generally
was involved in one activity per working day. In 1987 through
mid-1988, petitioner was busy every day. From mid-1988, large
gaps in the days shown on the daily record appear. In 1990, the
daily record shows that petitioner was involved in the first 2
months of the year with inventory preparation on behalf of DHS.
Petitioner notes the seizure of materials in August 1990. The
daily record also reflects that petitioner visited law libraries
5 out of the last 6 months of the calendar year 1990.
Petitioner also maintained records of sales of mercury to
clients from 1983 to 1988. This sales record lists order
numbers, the name of the clients, whether there was a "Small
Order Labor Charge", how many pounds the order was, and the total
charged with differing prices for in or outside of California.
Petitioner had more customers inside the State of California than
outside.
10
From 1978 to 1989, petitioner observed the proprietor of
Valley Smelting, a successful business which was also involved in
metal mining and refining activities. This person performed a
variety of activities such as: Recovering and refining lead and
mercury from scrap batteries, recovering metals from ores and ore
samples, manufacturing irrigation valves, and, operating a
mercury mine. Petitioner consulted with the proprietor in order
to determine the best means of business operation.
Petitioner chose work that was "interesting" and not
immediately profitable "whenever I had the cash to indulge * * *
[I did] so." When petitioner needed income in his business, he
would "do things that * * * [were] more mundane, less
interesting, but immediately profitable, such as industrial
controls, fabricating equipment." Petitioner has been able to
find work whenever he needed it. "I’ve always been able to make
sales * * * of that sort whenever I have needed to do so."
Petitioner, however, attempted to make the business
profitable by trying to obtain a large margin between the sales
price and the cost of goods sold. In time, petitioner was not
able to obtain metallic mercury from scrap batteries, hence, he
was unable to maintain a large margin between the sales price and
the cost of goods.
The metal refining activities performed by petitioner took
place on a 50-acre parcel that was mostly farm land.
Petitioner’s father farmed the land, and petitioner had a shop in
11
a barn on that property. The land around the barn and a nearby
house were also utilized by petitioner in his work. Petitioner
and his wife resided in a home, also owned by petitioner’s
parents, which was one-quarter of a mile away from the property
in question.
Petitioners’ Schedule C gross income, cost of goods sold
(COGS), expenses, and net gain or loss from 1977 through 1990 are
as follows:
12
Year Gross Income COGS Expenses Gain/Loss
1977 $52,324 $29,673 $16,313 $6,338
1
1978 31,223 19,086 11,627 510
1979 50,132 36,255 13,340 537
1980 19,864 7,304 13,399 (839)
1981 22,132 No record No record No record
1982 24,924 5,208 19,566 150
1
1983 38,281 17,013 26,095 (4,827)
1984 19,912 9,955 19,531 (9,574)
1985 19,926 10,015 24,371 (14,460)
1986 15,731 8,618 25,265 (18,152)
1987 20,541 12,876 25,545 (17,880)
1988 10,375 6,190 21,015 (16,830)
1989 8,093 5,098 19,748 (16,753)
1990 3,867 2,502 19,253 (17,888)
1
The parties stipulated to a $560 gain for 1978 and a $4,867
loss for 1983; however, the correct amounts appear to be a $510
gain for 1978 and a $4,827 loss for 1983.
The Schedule C cost of goods sold for 1990 in the amount of
$2,502 consisted of 4 large batteries. These batteries were
seized by the State of California.
OPINION
Respondent has conceded that petitioner has substantiated
the amounts in controversy. The primary issue to be decided is
whether petitioner's metal mining and refining activities for
1990 constituted an activity engaged in for profit within the
13
meaning of section 183. Petitioner contends that his metal
mining and refining activity was entered into with a profit
objective. Respondent contends that petitioner’s metal mining
and refining activity was an activity "not engaged in for profit"
within the meaning of section 183. Sec. 183(c).
Section 183(a) provides that, if an activity engaged in by
an individual is not engaged in for profit, no deduction
attributable to such activity shall be allowed, except as
provided in section 183(b).3 An "activity not engaged in for
profit" means any activity other than one for which deductions
are allowable under section 162 or under paragraphs (1) or (2) of
section 212. Sec. 183(c). Section 162 allows a deduction for
all the ordinary and necessary expenses paid or incurred in
carrying on a business. Section 212 allows a deduction for all
the ordinary and necessary expenses paid or incurred for the
production or collection of income, or for the management,
conservation, or maintenance of property held for the production
of income.
Whether deductions are allowable under sections 162 or 212
depends on whether the taxpayer engaged in the activity with the
3
In the case of an activity not engaged in for profit, sec.
183(b)(1) allows a deduction for expenses that are otherwise
deductible without regard to whether the activity is engaged in
for profit. Sec. 183(b)(2) allows a deduction for expenses that
would be deductible only if the activity were engaged in for
profit, but only to the extent the total gross income derived
from the activity exceeds the deductions allowed by sec.
183(b)(1).
14
objective of making a profit. Ronnen v. Commissioner, 90 T.C.
74, 91 (1988); Dreicer v. Commissioner, 78 T.C. 642, 645 (1982),
affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983). The
taxpayer's expectation of profit need not be a reasonable one;
however, the taxpayer must have a bona fide objective to make a
profit. Hulter v. Commissioner, 91 T.C. 371, 393 (1988); Beck v.
Commissioner, 85 T.C. 557, 569 (1985); Allen v. Commissioner, 72
T.C. 28, 33 (1979); Dunn v. Commissioner, 70 T.C. 715, 720
(1978), affd. without published opinion 607 F.2d 995 (2d Cir.
1979), affd. on another issue 615 F.2d 578 (2d Cir. 1980).
Whether a taxpayer has the requisite profit objective is a
question of fact to be resolved on the basis of all of the facts
and circumstances of the particular case. Golanty v.
Commissioner, 72 T.C. 411, 426 (1979), affd. without published
opinion 647 F.2d 170 (9th Cir. 1981); Dunn v. Commissioner, supra
at 720. The taxpayer bears the burden of proof on this issue.
Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). Greater
weight is given to objective facts than a taxpayer's statement of
intent. Beck v. Commissioner, supra at 570; Thomas v.
Commissioner, 84 T.C. 1244, 1269 (1985), affd. 792 F.2d 1256 (4th
Cir. 1986).
Section 1.183-2(b), Income Tax Regs., provides a
nonexclusive list of factors relevant to the issue as to whether
the taxpayer has the requisite profit objective. These factors
are: (1) The manner in which the taxpayer carries on the
15
activity; (2) the expertise of the taxpayer or his advisers; (3)
the time and effort expended by the taxpayer in carrying on the
activity; (4) the expectation that the assets used by the
taxpayer may appreciate in value; (5) the success of the taxpayer
in carrying on other similar or dissimilar activities; (6) the
taxpayer's history of income or losses with respect to the
activity; (7) the amount of occasional profits, if any, which are
earned; (8) the financial status of the taxpayer; and (9) whether
elements of personal pleasure or recreation are involved. Not
all of these factors are applicable in every case, and no one
factor is controlling. Taube v. Commissioner, 88 T.C. 464, 479-
480 (1987); Abramson v. Commissioner, 86 T.C. 360, 371 (1986);
Allen v. Commissioner, 72 T.C. at 34. No one factor nor a
majority of the factors is determinative, and we do not reach our
conclusion by merely counting the factors that support each
party's position. Taube v. Commissioner, supra at 480; Dunn v.
Commissioner, supra at 720.
1. The Manner in Which the Taxpayer Carries On the Activity
Petitioner contends that he conducted his activity in a
businesslike manner. However, petitioner did not maintain
adequate and accurate books of accounts and records of income and
expenses of the metal mining and refining activities. Petitioner
testified that he maintained timely contemporaneous records of
his activities. However, the extensive and businesslike records
of sales of mercury which only go up to 1988 is not duplicated
16
for any other aspect of the metal mining and refining activity in
1990. Petitioner also submitted a daily log of his activities
which incorporates 1990. However, much of what is written down
in that journal contains unexplained abbreviations. There are
blank spaces for a large number of days each month for 1990.
Moreover, petitioner’s compendium is not an adequate substitute
for books or records of income and expenses. For example, unlike
the records of sales of mercury, this does not list customers,
the kind of work performed, and the amounts charged, if any.
Thus, we cannot say that petitioner maintained adequate and
accurate books of accounts.
Petitioner’s marketing activities were, at best, minimal.
He advertised in the "California Mining Journal". Petitioner
distributed a prospectus on his sales policies to possible
clients. He also attended trade shows where he could meet
prospective customers. The records of sales of mercury show that
most of petitioner’s clients came from within California. There
were very few clients who were from out of State. Other than the
above factors, petitioner presented no evidence that he actively
sought business. Petitioner has not specifically shown any other
marketing activities in 1990.
In addition, petitioner had no business plan. At trial,
petitioner testified that he did not expect to earn a profit
immediately during 1986, before the dispute with DHS. He
expected to do so in 1987 but did not do so. The record reflects
17
that petitioner suffered 7 years of losses up to and including
the taxable year 1990. Petitioner had no business plan to
address the accumulating and expected losses.
While it is likely that petitioner entered into the metal
mining and refining activity with a profit objective, the
extended record of losses without abatement devalued the activity
into one that provided an offset to petitioners’ other income.
2. The Expertise of the Taxpayer and His Advisers
Petitioner developed, since childhood, the technical
knowledge, skill, and interest in the metal mining and refining
field. Petitioner also observed the proprietor of Valley
Smelting, a similar concern allegedly also involved in a similar
activity. Finally, by 1980, petitioner had a competitor who was
also recovering mercury from scrap batteries. Petitioner did not
demonstrate how he utilized the information gathered to address
any business decisions confronting his activity such as the rates
of continuing losses.
Although petitioner’s wife was a controller possessing
financial skills to develop and operate a business plan, the
record does not demonstrate that her skills were utilized.
3. The Time and Effort Expended by the Taxpayer in Carrying
On the Activity
Petitioner spent a minimal amount of time carrying out the
activity in 1990. He spent approximately 1 month on the
production of income in 1990. He contends, however, that the
18
State of California prevented him from earning money in his
pursuit. We recognize that the fact that the taxpayer devoted
less than full time to the activity does not necessarily indicate
the lack of a profit objective, where the taxpayer employs
competent and qualified persons to carry on the activity. Sec.
1.183-2(b)(3), Income Tax Regs. However, this is not the
situation here. This activity was maintained alone by
petitioner.
Although petitioner chose to engage in a personal pursuit
for relief from the environmental regulations, he did nothing to
remedy his lack of income or to reduce his expenses. By his
testimony, petitioner spent several months in 1990 addressing
compliance issues with DHS. We find that petitioner was
genuinely motivated by the desire to preserve his assets. On the
other hand, we think that the minimal amount of time petitioner
spent in this activity does not support his contention that he
was engaged in this activity with a profit objective in 1990.
4. The Expectation That Assets Used in the Activity
May Appreciate in Value
Petitioner did not present any evidence that any of the
assets used in his metal mining and refining activity would
appreciate in value.
5. The Success of the Taxpayer in Carrying On Other
Similar or Dissimilar Activities
19
Petitioner did not present any evidence that he had been
involved or demonstrated any success in any similar or dissimilar
type of activity.
6. The Taxpayer’s History of Income or Losses
With Respect to the Activity
Although no one factor is determinative of the taxpayer’s
objective to make a profit, a record of substantial losses, and
the unlikelihood of achieving a profitable operation is highly
probative of the taxpayer’s true objective. Golanty v.
Commissioner, 72 T.C. at 411; sec. 1.183-2(b)(6), Income Tax
Regs.
Petitioner’s main argument in this case is that the
activities of a State agency prevented him from operating a
profitable activity during 1990. Petitioner’s difficulties with
DHS resulted in prolonged delay, and, ultimately, in the seizure
of significant portions of petitioner’s inventory that was
allegedly hazardous waste.
Petitioner knew or should have known he was engaged in a
business that involved dangerous or hazardous chemicals.
Performing metal mining and refining operations required
adherence, at least to a degree, to minimal environmental
regulations, which represented a cost of doing business in this
particular field. Petitioner did not comply, and when confronted
with the environmental regulations, he chose to engage in lengthy
litigation. The dispute with DHS was not an unforeseen
20
circumstance that prevented petitioner from obtaining a profit in
this activity. Sec. 1.183-2(b)(6), Income Tax Regs.
The fact remains that petitioner had zero net income from
his metal mining and refining activity in 1990, and this was a
7-year trend. The cost of goods sold has diverged over the years
but, in general, there is a decrease. Finally, petitioner’s
gross income steadily declined leading up to 1990 while expenses
remained relatively stable. Furthermore, we notice that
petitioner’s expenses were not demonstrably affected by the
cessation of the activity of selling mercury in 1988. Hence, we
believe that the shortfall was not due to the dispute with DHS,
but, rather, that the activity itself could not reasonably be
expected to result in a profit, and because petitioner took no
measures to reduce his expenditures for unprofitable activities.
7. The Amount of Occasional Profits Earned, if Any
The record demonstrates profitability only in 4 of the
earliest of 14 years. The 7 years up to and including 1990
demonstrate consistent losses similar in magnitude.
8. The Financial Status of the Taxpayer
The metal mining and refining activity was profitable only
in the first few years. All subsequent years show losses of a
considerable scope. Also, there existed no financial pressure or
incentive on petitioner to pursue work that was consistently
profitable. In fact, the support of petitioner’s parents and
wife allowed petitioner to sustain the losses incurred in the
21
activity year after year. Petitioner’s parents provided the use
of a residence and a barn where the activity was conducted.
Petitioner’s wife’s wages earned met living expenses, which
allowed petitioner to maintain the activity in question.
9. The Elements of Personal Pleasure or Recreation
Involved in the Activity
The record clearly demonstrates that petitioner has been
strongly interested in the field of metal mining and refining
since he was a youth. It was this interest that motivated
petitioner to get involved in the metal mining and refining
activity. Petitioner testified that the aspects of that
particular activity were "interesting" to him. He noted that
this activity was not immediately profitable. We believe that
engaging in this activity provided significant pleasure to
petitioner.
Hard work alone is not enough to establish a profit-seeking
objective. Feldman v. Commissioner, T.C. Memo. 1986-287. While
the metal mining and refining activity is hard physical work and
may not seem pleasurable to some, petitioner enjoyed this
activity and lifestyle. In addition, petitioner had a propensity
to pursue these activities, which he found pleasurable such as
research. He would pursue less desirable income-producing
activities only to the extent that it would serve to finance his
enjoyable non-income-producing pursuits.
22
After considering the entire record, we hold that petitioner
did not engage in the activity of metal mining and refining
during 1990 with the bona fide objective of making a profit.
Other than his self-serving testimony, we find that petitioner
did not present any evidence that supported his position that he
had an actual and honest objective of making a profit from his
metal mining and refining activity. Petitioner, based on his
losses, should have been aware that the activity was either
incapable of generating a profit or that his performance and
assumptions were seriously flawed. However, the record does not
show that petitioner had a business plan to stem or assuage the
losses. Hence, we find that petitioner has failed to carry his
burden of proving that he engaged in that activity with a profit
objective.
We hold that petitioner was not engaged in an activity for
profit under section 183. Accordingly, we sustain respondent on
this issue.
Failure to File
Finally, we decide whether petitioner is liable for the
addition to tax under section 6651(a)(1) for failure to file a
timely return. Section 6651(a)(1) provides for an addition to
tax of 5 percent of the amount of income tax required to be shown
on the return if such failure to file is for not more than 1
month, with an additional 5 percent for each month such failure
continues, not to exceed 25 percent. The addition to tax under
23
section 6651(a)(1) applies unless the taxpayer establishes that
the failure to file did not result from "willful neglect" and
that the failure to file was "due to reasonable cause." "Willful
neglect" has been construed to mean a conscious, intentional
failure, or reckless indifference. United States v. Boyle, 469
U.S. 241, 245-246 (1985). "Reasonable cause" requires a taxpayer
to demonstrate that he or she exercised ordinary business care or
prudence.
Petitioner’s 1990 tax return was signed by the petitioners
on October 22, 1991, and received by respondent on October 24,
1991. Petitioner has failed to present any evidence of
reasonable cause for filing his return late. Therefore,
petitioner is liable for the addition to tax under section
6651(a)(1).
24
To reflect the foregoing,
Decision will be entered
under Rule 155.