T.C. Memo. 2006-206

UNITED STATES TAX COURT

GARY M. JADRO, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 11148-04. Filed September 25, 2006.

P failed to file a Federal income tax return for

2000. R determined a deficiency and additions to tax

pursuant to secs. 6651(a)(1) and (2), and 6654, I.R.C. 

The parties settled all issues raised in the notice of

deficiency with the exception of P’s liability for the

sec. 6651(a)(1), I.R.C., addition to tax.

Held: P is liable for an addition to tax pursuant

to sec. 6651(a)(1), I.R.C.

Gary M. Jadro, pro se.

Lauren B. Epstein and Francis Mucciolo, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

WHERRY, Judge: Respondent determined a Federal income tax
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1Unless otherwise indicated, all section references are to

the Internal Revenue Code (Code) in effect for the year in issue.

deficiency for petitioner’s 2000 taxable year in the amount of

$50,729, and additions to tax pursuant to section 6651(a)(1) and

(2) of $11,414.02 and $4,819.25, respectively, and pursuant to

section 6654 of $2,728.40.1 Subsequently, the parties reached a

partial settlement under which petitioner is liable for a reduced

tax deficiency of $13,170 and is not liable for additions to tax

pursuant to sections 6651(a)(2) and 6654. The remaining issue

for decision is whether petitioner is liable for the addition to

tax pursuant to section 6651(a)(1) for the 2000 taxable year.

FINDINGS OF FACT

At the time this petition was filed, petitioner resided in

St. Cloud, Florida.

During 2000, petitioner received $45 in dividends, $1,009 of

interest income, and $7,735 of gross rental income. Also in

2000, petitioner sold a piece of commercial property for

$293,000, which generated $91,314.90 in cash proceeds and a gain

for petitioner. In addition, petitioner engaged in numerous

stock sales and received proceeds totaling $176,717.

In 2001 petitioner went to an Internal Revenue Service (IRS)

office in Paramus, New Jersey, for help filling out his tax

return and was instructed to call a toll-free phone number

because in person help was not available for Form 1040 Schedule
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D, Capital Gains and Losses. Petitioner contends that he was

unable to follow the instructions he received over the telephone

and needed to be shown in person how to fill out his tax return. 

Petitioner did not file a tax return for 2000.

Respondent issued a notice of deficiency on March 22, 2004,

determining the deficiency and additions to tax set forth above.

Petitioner filed a timely petition disputing the deficiency and

additions to tax.

OPINION

I. Contentions of the Parties

Petitioner contends that he believed he was not required to

file a Federal income tax return for 2000 because he did not

generate sufficient income. Petitioner further contends that he

is unable to file a Federal income tax return for 2000 due to his

inability to understand and complete the requisite forms and lack

of help from the IRS in completing the forms. Petitioner also

asserts that his deteriorating financial condition prevented him

from seeking professional assistance.

Respondent contends that petitioner knew that he was

required to file a Federal income tax return for 2000 because of

interest income, rental income, and gain from the sale of stock

and a commercial property. Respondent further contends that

petitioner was capable of completing a Federal income tax return

for 2000. Petitioner knew the amount he paid for the commercial
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property and stock, as well as the amount of the sales proceeds,

and from prior returns could have determined the depreciation

allowed or allowable.

II. Addition to Tax

The Commissioner bears the burden of production in any court

proceeding with respect to an individual’s liability for

penalties or additions to tax. Sec. 7491(c). To meet this

burden, the Commissioner must present “sufficient evidence

indicating that it is appropriate to impose the relevant penalty”

or addition to tax. Higbee v. Commissioner, 116 T.C. 438, 446

(2001). In instances where an exception to the penalty or

addition to tax is afforded upon a showing of reasonable cause,

the taxpayer bears the burden of showing such cause. Id. at 446-

447.

Section 6651(a)(1) imposes a 5-percent addition to tax for

each month or portion thereof a required return is filed after

the prescribed due date, not to exceed 25 percent in the

aggregate, unless such failure to file timely is due to

reasonable cause and not due to willful neglect. Although not

defined in the Code, “reasonable cause” is described by the

applicable regulations as the “exercise of ordinary business care

and prudence”. Sec. 301.6651-1(c)(1), Proced. & Admin. Regs.;

see also United States v. Boyle, 469 U.S. 241, 246 (1985). 

“[W]illful neglect” is interpreted as “a conscious, intentional
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failure or reckless indifference.” United States v. Boyle, supra

at 245. “Whether the elements that constitute ‘reasonable cause’

are present in a given situation” to excuse a failure to file

timely is a question of fact. Id. at 249 n.8 (emphasis omitted).

The Court concludes that respondent’s burden of production

has been met. Petitioner admits that he had sufficient gross

income to require the filing of a Federal income tax return and

that he never filed his 2000 tax return. The burden then shifts

to the taxpayer to prove both that the failure to file was not

due to willful neglect and that such failure was due to

reasonable cause. Id. at 245.

Reasonable cause denotes an absence of fault. Id. at 247

n.4. A taxpayer must prove that his failure to file timely was

the “result neither of carelessness, reckless indifference, nor

intentional failure.” Id. “Generally, factors that constitute

‘reasonable cause’ include unavoidable postal delays, death or

serious illness of the taxpayer or a member of his immediate

family, or reliance on the mistaken legal opinion of a competent

tax adviser, lawyer, or accountant that it was not necessary to

file a return.” Marrin v. Commissioner, 147 F.3d 147, 152 (2d

Cir. 1998), affg. T.C. Memo. 1997-24. These factors are

inapplicable here.

The Court is convinced that initially petitioner acted as a

reasonable and prudent business person and put forth reasonable
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efforts to fill out and file his tax return. Petitioner sought

help from the IRS both in person and telephonically and produced

at trial tax forms he attempted to fill out based on the

telephonic advice and the forms’ instructions. However, initial

reasonable cause may not exist indefinitely. At some point

petitioner ceased acting as a reasonable and prudent business

person because he terminated his active efforts to comply with

the law and never filed his 2000 tax return. Notably, the record

does not reflect that petitioner applied to respondent for an

extension of time to file his 2000 tax return.

Petitioner also contends that he did not file his 2000

return because he mistakenly believed he did not generate

sufficient income. Petitioner’s belief, without any confirmation

from a knowledgeable tax adviser, that no tax is due or that

petitioner is entitled to a refund does not constitute reasonable

cause. Ferguson v. Commissioner, T.C. Memo. 1994-114.

Although the Court is sympathetic to petitioner and the

circumstances of his case, the Court concludes that petitioner

has not demonstrated reasonable cause for failing to file his

2000 tax return. Therefore, the Court sustains the imposition of

an addition to tax pursuant to section 6651(a)(1).

The Court has considered all of petitioner’s contentions,

arguments, requests, and statements. To the extent not discussed

herein, we conclude that they are meritless, moot, or irrelevant.
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To reflect the foregoing and concessions made,

Decision will be entered

under Rule 155.