T.C. Summary Opinion 2009-100

UNITED STATES TAX COURT

KATHERINE A. HUMES, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 23824-07S. Filed July 6, 2009. 

Katherine A. Humes, pro se.

Richard J. Hassebrock, for respondent.

DEAN, Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect when the petition was filed. Pursuant to section 7463(b),

the decision to be entered is not reviewable by any other court,

and this opinion shall not be treated as precedent for any other

case. Unless otherwise indicated, subsequent section references

are to the Internal Revenue Code in effect for the years in
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1The parties agree that petitioner: (1) Received income of

$71,260 and $70,584 for 2003 and 2004, respectively; (2) is

entitled to a “Schedule C” deduction for licenses of $318 for

2003; (3) is entitled to Schedule C deductions for wages of

$40,623 and $25,151 for 2003 and 2004, respectively; (4) is

entitled to Schedule C deductions for rent of $5,100 for each

year; (5) is entitled to Schedule C deductions for insurance of

$1,750 for each year; (6) is liable for self-employment tax for

each year to be computed in accordance with secs. 1401 and 1402;

and (7) is entitled to a self-employment tax deduction pursuant

to sec. 164(f) for each year.

issue, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

Respondent determined deficiencies of $21,068 and $21,122 in

petitioner’s 2003 and 2004 Federal income taxes, respectively,

and additions to tax under sections 6651(a)(1) and (2) and

6654(a) for each year. The issues remaining1 for decision are

whether petitioner is liable for additions to tax under sections

6651(a)(1) and (2) and 6654(a) for each year.

Background 

Some of the facts have been stipulated and are so found.

The stipulation of facts and the exhibits received into evidence

are incorporated herein by reference. When the petition was

filed, petitioner resided in Ohio.

During 2003 and 2004 petitioner was self-employed practicing

medicine. For each year she received significant income and

incurred deductible expenses, but she did not file Federal income
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2On Apr. 15, 2004, petitioner applied for an extension of

time to file her 2003 Federal income tax return until Aug. 15,

2004, but she did not file it. 

3$21,068 (total tax before credits) - $1,069 (prepaid

withheld tax).

4$21,122 (total tax before credits) - $0 (prepaid credits or

withheld tax).

tax returns.2 Therefore, respondent prepared substitutes for

returns for petitioner pursuant to section 6020(b) for 2003 and

2004 that were filed April 2, 2007. 

From third-party payer reports respondent determined that

petitioner received $71,260 and $70,854 in gross income for 2003

and 2004, respectively. For 2003 respondent allowed petitioner

an adjustment to income of $4,796, one personal exemption of

$3,050, a standard deduction of $4,750, and a credit for withheld

tax of $1,069. For 2004 respondent allowed petitioner an

adjustment to income of $4,986.50, one personal exemption of

$3,100 and a standard deduction of $4,850. Respondent determined

a net tax of $19,9993 and $21,1224 for 2003 and 2004,

respectively. Respondent also determined additions to tax under

sections 6651(a)(1) and (2) and 6654(a). 

Discussion

I. General

Initially, the Commissioner has the burden of production

with respect to any penalty, addition to tax, or additional

amount. Sec. 7491(c). The Commissioner satisfies this burden of
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5If the Secretary makes a return for the taxpayer under sec.

6020(b), it is disregarded for purposes of determining the amount

of the addition to tax under sec. 6651(a)(1), but it is treated

as a return filed by the taxpayer for purposes of determining the

amount of the addition to tax under sec. 6651(a)(2). Sec.

6651(g).

production by coming forward with sufficient evidence that

indicates that it is appropriate to impose the penalty. See

Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Once the

Commissioner satisfies this burden of production, the taxpayer

must persuade the Court that the Commissioner’s determination is

in error by supplying sufficient evidence of an applicable

exception. Id.

II. Section 6651(a)(1) Addition to Tax

Section 6651(a)(1) imposes an addition to tax for failure to

file a return on the date prescribed (determined with regard to

any extension of time for filing) unless the taxpayer can

establish that the failure is due to reasonable cause and not due

to willful neglect.5 

Petitioner did not file her 2003 and 2004 Federal income tax

returns. Respondent has produced sufficient evidence that

petitioner is liable for the 2003 and 2004 section 6651(a)(1)

additions to tax unless an exception applies. See Higbee v.

Commissioner, supra at 446; Ruggeri v. Commissioner, T.C. Memo.

2008-300. 
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6The amount of the addition to tax under sec. 6651(a)(2)

reduces the amount of the addition to tax under sec. 6651(a)(1)

for any month to which an addition to tax applies under both

paragraphs. Sec. 6651(c)(1).

III. Section 6651(a)(2) Addition to Tax

Section 6651(a)(2) imposes an addition to tax for failure to

pay the amount shown as tax on the taxpayer’s return on or before

the date prescribed (determined with regard to any extension of

time for payment) unless the taxpayer can establish that the

failure is due to reasonable cause and not due to willful

neglect.6

Respondent submitted copies of the substitutes for returns

that he prepared for petitioner, and petitioner did not pay her

2003 and 2004 income taxes as shown on the substitutes for

returns by April 15, 2004 and 2005, respectively. See Wheeler v.

Commissioner, 127 T.C. 200, 208-209 (2006), affd. 521 F.3d 1289

(10th Cir. 2008); Hawkins v. Commissioner, T.C. Memo. 2008-168. 

Respondent has produced sufficient evidence that petitioner is

liable for the 2003 and 2004 section 6651(a)(2) additions to tax

through April 2007 unless an exception applies. See Higbee v.

Commissioner, supra at 446; Ruggeri v. Commissioner, supra. 

IV. Section 6654(a) Addition to Tax

Section 6654(a) imposes an addition to tax on an

underpayment of estimated income tax unless an exception applies. 

See sec. 6654(e). The addition to tax is calculated with
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reference to four required installment payments of the taxpayer’s

estimated income tax. Sec. 6654(c)(1); Wheeler v. Commissioner,

supra at 210. Each required installment of estimated income tax

is equal to 25 percent of the “required annual payment.” Sec.

6654(d)(1)(A). The required annual payment is generally equal to

the lesser of: (i) 90 percent of the tax shown on the taxpayer’s

return for the year (or, if no return is filed, 90 percent of the

taxpayer’s tax for the year); or (ii) if the taxpayer filed a

return for the immediately preceding taxable year, 100 percent of

the tax shown on the return. Sec. 6654(d)(1)(B); Wheeler v.

Commissioner, supra at 210-211. But if the taxpayer did not file

a return for the preceding year, then clause (ii) does not apply.

Sec. 6654(d)(1)(B). A taxpayer has an obligation to pay

estimated income taxes for a particular year only if he/she had a

“required annual payment” for that year. Wheeler v.

Commissioner, supra at 211.

A. Section 6654(a) Addition to Tax: 2003

Petitioner failed to file a Federal income tax return for

2003 and that is sufficient for the Court to make the analysis

required by section 6654(d)(1)(B)(i). But respondent failed to

introduce evidence of whether petitioner filed a return for the

preceding taxable year, i.e., 2002, and if she did, the amount of

tax shown on her 2002 return. Without that evidence, the Court

cannot identify the amount equal to 100 percent of the tax shown
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on her 2002 return. Therefore, the Court cannot conclude that

petitioner had a required annual payment for 2003 because

respondent failed to produce sufficient evidence, as required by

section 7491(c), to allow the Court to complete the comparison

required by section 6654(d)(1)(B). See Wheeler v. Commissioner,

supra at 211-212. Accordingly, petitioner is not liable for the

2003 section 6654(a) addition to tax. 

B. Section 6654(a) Addition to Tax: 2004

Petitioner failed to file Federal income tax returns for

2003 and 2004. Consequently, her required annual payment for

2004 is limited to 90 percent of the tax for 2004, which was

payable in installments under section 6654. See sec. 6654(b),

(d)(1)(B). Petitioner did not make any estimated income tax

payments for 2004. Respondent has produced sufficient evidence

that petitioner is liable for the 2004 section 6654(a) addition

to tax unless an exception applies. 

V. Exceptions to the Additions to Tax

Reasonable cause is a defense to the section 6651(a)(1) and

(2) additions to tax. Except as provided in section

6654(e)(3)(B), no reasonable cause exception exists for the

section 6654(a) addition to tax. Sec. 1.6654-1(a)(1), Income Tax

Regs.; see also Bray v. Commissioner, T.C. Memo. 2008-113. But

no addition to tax is imposed under section 6654(a) with respect

to any underpayment to the extent the Secretary determines that
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7The term “disabled” includes a significant psychiatric

disorder and mental incapacitation during the period under

consideration, Shaffer v. Commissioner, T.C. Memo. 1994-618, or

confinement to various hospitals for “severe mental illness”,

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. 2006-176; see also Meyer v.

Commissioner, T.C. Memo. 2003-12 (taxpayer’s severe health

problems and mental condition incapacitated him; thus, a sec.

6654(e) exception was applicable). In addition, the disability

may constitute reasonable cause. Jones v. Commissioner, supra.

by reason of casualty, disaster, or other unusual circumstances

the imposition of the addition to tax would be against equity or

good conscience. Sec. 6654(e)(3)(A). Additionally, no addition

to tax is imposed under section 6654(a) with respect to any

underpayment if the Secretary determines that the taxpayer

retired after age 62 or became disabled7 in either the taxable

year for which estimated income tax payments were required or in

the preceding taxable year and the underpayment was due to

reasonable cause and not to willful neglect. Sec. 6654(e)(3)(B).

To prove reasonable cause for a failure to file timely, the

taxpayer must show that he/she exercised ordinary business care

and prudence and 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. 

To prove reasonable cause for a failure to pay the amount

shown as tax on a return, the taxpayer must show that he/she

exercised ordinary business care and prudence in providing for

payment of his/her tax liability and nevertheless was either
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unable to pay the tax or would suffer undue hardship if he/she

paid the tax on the due date. Sec. 301.6651-1(c)(1), Proced. &

Admin. Regs. In determining whether the taxpayer was unable to

pay the tax in spite of the exercise of ordinary business care

and prudence, consideration will be given to all of the facts and

circumstances of the taxpayer’s financial situation, including

the amount and nature of the taxpayer’s expenditures in view of

the income (or other amounts) he/she could at the time of the

expenditures reasonably expect to receive before the date

prescribed for the payment of the tax. See id.

Petitioner testified that she made every effort to file her

Federal income tax returns and to pay her taxes, but she was

having problems, which is why she “is not practicing now.” She

was treated for emotional problems for years, and eventually she

was hospitalized on account of her emotional problems and related

physical ailments in December 2003 and August 2004 “for a month

both times.” She also testified that she was able to work in

2003 and 2004 and to apply for an extension of time to file her

return for 2003, but she was so “overwhelmed that * * * it led”

to her hospitalization. According to petitioner, “work [was] the

last thing to go and that’s the only thing [she] did” until she

stopped working in August 2004. She added that she was able to

pay her bills in 2003 but not in 2004 and that the mortgage on

her house was foreclosed in 2005 because her payments were about
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8It is unclear from the record when petitioner contacted the

accountant; e.g., around April 2004 or 2005 (the due dates of her

Federal income tax returns) or after issuance of the notices of

deficiency in July 2007.

1 year in arrears. Finally, she testified that she contacted an

accountant to help her with her income tax obligations, but she

could not afford his services.8

In certain circumstances a taxpayer’s illness or incapacity

may constitute reasonable cause for failure to file timely,

failure to pay the amount shown as tax, or failure to pay

estimated income tax. Jordan v. Commissioner, T.C. Memo.

2005-266 (and cases cited therein); see also Carlson v. United

States, 126 F.3d 915, 921-923 (7th Cir. 1997) (discussing the

addition to tax for failure to pay); Meyer v. Commissioner, T.C.

Memo. 2003-12 (discussing the addition to tax for failure to pay

estimated income tax). On the other hand, if the taxpayer is

able to continue his/her business affairs despite the illness or

incapacity, then such illness or incapacity will not demonstrate

reasonable cause. Ruggeri v. Commissioner, T.C. Memo. 2008-300

(and cases cited therein); Hazel v. Commissioner, T.C. Memo.

2008-134; Jordan v. Commissioner, supra (and cases cited

therein). In addition, a taxpayer’s selective incapacity or

inability to meet his/her tax obligations when he/she can conduct

normal business activities does not demonstrate reasonable cause. 

Jordan v. Commissioner, supra; Wright v. Commissioner, T.C. Memo.
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1998-224, affd. without published opinion 173 F.3d 848 (2d Cir.

1999); Tabbi v. Commissioner, T.C. Memo. 1995-463.

Petitioner applied for an extension of time to file her

Federal income tax return for 2003, extending its due date until

August 15, 2004. Petitioner testified that she stopped

practicing medicine in August 2004 and that she was hospitalized

in August 2004 for emotional problems. Although petitioner

submitted no evidence to corroborate her testimony, the Court

observed her appearance and demeanor at trial and finds her

testimony to be honest, sincere, and credible. But see, e.g.,

Urban Redev. Corp. v. Commissioner, 294 F.2d 328, 332 (4th Cir.

1961) (the Court may reject a taxpayer’s uncorroborated

testimony), affg. 34 T.C. 845 (1960). The Court, therefore,

holds that petitioner has established a reasonable cause defense

for the 2003 section 6651(a)(1) addition to tax. 

The Court, however, finds that petitioner has not

established a reasonable cause defense for the 2004 section

6651(a)(1) addition to tax. Petitioner’s 2004 return was due

April 15, 2005. See sec. 6072(a). She provided no evidence that

she was suffering from any illness or incapacity in April 2005,

and therefore, respondent’s imposition of the 2004 section

6651(a)(1) addition to tax is sustained. See Hazel v.

Commissioner, supra; Shaffer v. Commissioner, T.C. Memo.

1994-618. 
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Petitioner testified that she stopped working in August 2004

because of her emotional problems, that she was unable to manage

her finances in 2004, that she was 1 year in arrears on her

mortgage payments, and the mortgage was foreclosed in 2005. 

Having determined that petitioner’s testimony was credible, the

Court holds that petitioner has established a reasonable cause

defense for the 2003 section 6651(a)(2) addition to tax. 

The Court, however, finds that she has not proven that she

was unable to pay her 2004 income tax or that she would have

otherwise suffered an undue hardship if she had paid her 2004

income tax on April 15, 2005 (i.e., its due date). Specifically,

petitioner provided no evidence of her income, assets, and other

financial liabilities in 2005. See sec. 301.6651-1(c), Proced. &

Admin. Regs. Therefore, the Court sustains the 2004 section

6651(a)(2) addition to tax. See Carlson v. United States, supra

at 923. 

The Court also finds that petitioner has established a

defense for the 2004 section 6654(a) addition to tax based on

either a disability for which the underpayment was due to

reasonable cause or an unusual circumstance for which the

imposition of the addition to tax would be against equity or good

conscience. See Jones v. Commissioner, T.C. Memo. 2006-176;

Meyer v. Commissioner, supra. 
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To reflect the foregoing, 

Decision will be entered

under Rule 155.