1Unless otherwise indicated, all section references are to

the Internal Revenue Code (Code), as amended, and all Rule

references are to the Tax Court Rules of Practice and Procedure. 

Amounts are rounded to the nearest dollar.

T.C. Memo. 2009-125

UNITED STATES TAX COURT

JAMES H. KELSO, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 19367-07L. Filed June 1, 2009.

Stan D. Blyth, for petitioner.

Christian A. Speck, for respondent.

MEMORANDUM OPINION

HAINES, Judge: The parties submitted this case to the Court

without trial. See Rule 122.1 Respondent made the determination

to proceed to collect by levy petitioner’s 2000, 2001, 2002,
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2003, and 2004 (the years at issue) outstanding income tax

liabilities of $24,980, $79,303, $66,761, $47,791, and $38,598,

respectively. Petitioner seeks review of respondent’s

determination under section 6330.

The parties’ controversy poses the following issues for our

consideration: (1) Whether respondent abused his discretion by

rejecting petitioner’s offer to enter into an installment

agreement; and (2) whether respondent erred by failing to abate

petitioner’s addition to tax for 2002 under section 6651(a)(1). 

Background

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time petitioner

filed his petition, he resided in California. 

During the years at issue petitioner was self-employed as a

periodontist. Petitioner did not fully pay the tax liabilities

reflected on the returns he filed for the years at issue. On

November 1, 2004, petitioner filed his 2002 return late.

On May 11, 2005, respondent mailed to petitioner a Final

Notice, Notice of Intent to Levy and Notice of Your Right

to a Hearing for the unpaid liabilities for 2000, 2001, 2002, and

2003 (2000-03 notice). Petitioner made a timely request for a

section 6330 hearing concerning the 2000-03 notice. 
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On April 19, 2006, respondent mailed to petitioner a Final

Notice, Notice of Intent to Levy and Notice of Your Right

to a Hearing for unpaid liability for 2004 (2004 notice).

Petitioner made a timely request for a section 6330 hearing

concerning the 2004 notice.

On February 12, 2007, respondent’s Appeals officer spoke by

telephone with petitioner concerning the years at issue. During

the call petitioner proposed a partial payment installment

agreement of $750 per month, to be reviewed every 3 years. 

Petitioner provided respondent with a variety of documents

concerning petitioner’s medical condition and financial status to

support his proposal for an installment agreement. Petitioner’s

Form 433-A, Collection Information Statement for Wage Earners and

Self-Employed Individuals, indicated that petitioner had net

income of $10,205 per month over an 11-month period ending

November 30, 2006. Petitioner’s Forms 1040, U.S. Individual

Income Tax Return, for 2006 and 2007 indicated that petitioner’s

net income from Schedule C, Profit or Loss From Business,

averaged $12,262 per month for 2006 and $11,373 per month for

2007, respectively. 

On July 23, 2007, respondent issued a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 that sustained the collection actions for the years
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at issue. In response, petitioner filed a timely petition with

this Court.

Discussion

I. Installment Agreement

When a levy is proposed to be made on any property or right

to property, a taxpayer is entitled to a notice of intent to levy

and notice of the right to a fair hearing before an impartial

officer of the Appeals Office. Secs. 6330(a) and (b), 6331(d). 

If the taxpayer requests a hearing, he may raise in that hearing

any relevant issue relating to the unpaid tax or the proposed

levy, including challenges to the appropriateness of the

collection action and “offers of collection alternatives, which

may include the posting of a bond, the substitution of other

assets, an installment agreement, or an offer-in-compromise.” 

Sec. 6330(c)(2)(A). A determination is then made which takes

into consideration those issues, the verification that the

requirements of applicable law and administrative procedures have

been met, and “whether any proposed collection action balances

the need for the efficient collection of taxes with the

legitimate concern of the person that any collection action be no

more intrusive than necessary.” Sec. 6330(c)(3).

Petitioner disputes respondent’s rejection of his proposed

installment agreement. We review the rejection of the proposed

installment agreement for abuse of discretion. See Lunsford v.
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2Petitioner submitted a document to the court entitled

“Health Plan” in which petitioner notes that in 2006 his doctors

recommended that he reduce his work week from 6 to 4 days to

allow him time to exercise or attend personal training. 

Nevertheless, petitioner earned income in 2007 comparable to what

he earned in prior years.

Commissioner, 117 T.C. 183, 185 (2001); Nicklaus v. Commissioner,

117 T.C. 117, 120 (2001).

Respondent’s Appeals officer reviewed petitioners’ submitted

financial information and determined that an installment

agreement was not appropriate. We received as exhibits the

financial information presented to respondent and find that the

Appeals officer could have reasonably concluded that petitioner

receives sufficient income to satisfy the tax liabilities without

resorting to a partial payment installment agreement of $750 per

month. Petitioner’s statement of income for his dental business

for 2006 indicates that he had an average net profit of $10,205

per month. Petitioner’s 2007 return indicates that he had an

average net profit of $11,373 per month. The medical information

petitioner submitted does not indicate that petitioner’s future

earning potential would be drastically reduced as a result of his

health problems.2 Accordingly, we conclude that respondent’s

refusal to enter into an installment agreement was not an abuse

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

We apply the de novo standard of review to respondent’s 

determination to not abate the section 6651(a)(1) addition to

tax. See Downing v. Commissioner, 118 T.C. 22, 28-29 (2002). 

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

file a return by its due date. The addition is equal to 5

percent of the amount required to be shown as tax on the return

for each month or portion thereof that the return is late, up to

a maximum of 25 percent. See id. The addition is imposed on the

net amount due, calculated by reducing the amount required to be

shown as tax on the return by any part of the tax which is paid

on or before its due date. See sec. 6651(b)(1). 

The addition will not apply if it is shown that the failure

to file a timely return was due to reasonable cause and not due

to willful neglect. See sec. 6651(a)(1); see also United States

v. Boyle, 469 U.S. 241, 245 (1985). A failure to file is due to

reasonable cause “If the taxpayer exercised ordinary business

care and prudence and was nevertheless unable to file the return

within the prescribed time”. Sec. 301.6651-1(c)(1), Proced. &

Admin. Regs.; see United States v. Boyle, supra at 246. Willful

neglect is interpreted as a “conscious, intentional failure or

reckless indifference.” United States v. Boyle, supra at 245. 

Petitioner admits that he did not file his 2002 return until

November 1, 2004. This fact satisfies respondent’s burden of
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production under section 7491(c) and establishes petitioner’s

liability for the section 6651(a)(1) addition to tax unless

petitioner can establish reasonable cause for his failure to file

a timely return. See Higbee v. Commissioner, 116 T.C. 438, 446

(2001).

Petitioner argues that the late filing of his 2002 return

was due to reasonable cause because he was suffering from back

injuries and chronic dizziness caused by two automobile accidents

in 1997 and 2003. 

The Court has found reasonable cause where the taxpayer

experiences an illness or incapacity that prevents the

taxpayer from filing his or her tax return. See, e.g., Harris v.

Commissioner, T.C. Memo. 1969-49 (reasonable cause found where

the taxpayer’s activities were severely restricted, and the

taxpayer was in and out of hospitals because of various severe

medical ailments including stroke, paralysis, heart attack,

bladder trouble, and breast cancer).

On the other hand, the Court has not found reasonable cause

where the taxpayer does not timely file but is able to continue

his or her business affairs despite the illness or incapacity.

See, e.g., Judge v. Commissioner, 88 T.C. 1175, 1189-1191 (1987)

(no reasonable cause found where the taxpayer had a long history

of delinquent filing of returns and the taxpayer was actively

involved in preparing and executing business-related documents
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3The fact that petitioner had reason to store tennis rackets

in his car also seems to indicate that his physical condition was

not so dire as to preclude him from timely filing his 2002

return.

despite illness during years at issue); Watts v. Commissioner,

T.C. Memo. 1999-416 (reasonable cause not found where, although

the taxpayer’s mother and daughter were both ill and the taxpayer

frequently took them to see doctors, the taxpayer also performed

extensive architectural services in the taxpayer’s business).

While we do not trivialize the medical problems facing

petitioner, the record indicates he was able to continue his

business and carry on his affairs throughout the years at issue. 

Petitioner’s medical problems do not rise to the level necessary

to find reasonable cause for failure to timely file. 

Petitioner also contends that he failed to timely file

because he lost financial information as a result of the

robberies. Petitioner has submitted evidence of only one

robbery, in the form of a police report. The report indicates

that on January 22, 2003, petitioner’s car was broken into and

two tennis rackets and a watch were stolen. The record does not

indicate that petitioner’s financial information for 2002 was

lost in this incident.3

On the basis of the foregoing, we hold that petitioner did

not have reasonable cause for his failure to timely file his 2002
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return. Accordingly, we hold that respondent may proceed with

the collection action.

In reaching our holding herein, we have considered all

arguments made, and, to the extent not mentioned above, we

conclude that they are moot, irrelevant, or without merit.

To reflect the foregoing,

Decision will be entered

for respondent.