# United **States Tax Court**

T.C. Memo. 2023

- 18

JAMES WILLIAM AVERY

, Petitioner

v

. COMMISSIONER OF INTERNAL REVENUE, Respondent

—————

Docket N o. 23237

- 18L

. Filed February 21, 2023.

————— James William Avery , pro se

.
Jeri L. Acromite , for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

LAUBER

, Judge : In this collection due process (CDP) case petitioner seeks review pursuant to section 6330(d)(1) 1 of the determinati on s by the Internal R evenue Service (IRS or resp o ndent ) to uphold collection actions for tax years 200 8

– 20 1 3

. Petitioner was afforded a CDP hearing during which he attempted to challenge his underlying tax liabilities , including deficiencies , accuracy

- related penalties, and additions
to tax . The settlement o fficer s (SO s ) refused to consider this challenge because the IRS had issued him notices of deficiency. See § 6330(c)(2)(B). Respondent concedes that petitioner did not receive those notices, that the SO s erred in declining to address hi s underlying

1 Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. We round all monetary amounts to the nearest dollar.



### Served 02/21/232

[* 2 ] liability challenge, and that his liabilit y challenge is properly before this Court.

W e held a trial to consider that dispute . The principal question is whether the IRS erred in d eclining to allow deductio ns for $ 303,366 of adv ertising expenses that petitioner al legedly incurred during 2008

– 2013 in connection with his business as an attorney. Petitioner contends that the se deduction s correspond to expense s he incurred in conducting a racing car activity , which he says promoted his litigation practice. Respondent replies that petitioner failed to substantiate half of these expenses and that the racing

- related costs he did substantiate were not “ordinary and necessary expense s paid or incurred . . . in ca rrying on [ hi s] trade or business. ” See § 162(a)

. We agree with respondent on both counts and hold that petitioner is not entitled to deduct advertising cost s in excess of those the IRS has allowed. Respondent has conceded the
accuracy

- related penalties for all years, but we find that petitioner is liable for certain additions to tax in amounts to be recalculat ed

.
FINDINGS OF FACT

The following facts are derived from the pleadings, two S tipulations of F acts with attached E x hibits , and the documents and testimony admitted into evidence at trial. Petitioner resided in Colorado when his P etition was timely filed.

I

. Petitioner’s Legal Career

Petitioner attended law school at the University of Denver and became licensed to practice law in 1982. During his career he has specialized in personal injury law, chiefly on behalf of plaintiffs. In the late 1980s h e started his own law firm in Colorado

. In 2003 he married a woman f r om Indiana, moved to Indiana, and became licensed to practice there

. After that marriage fell apart in 2010, he moved back to Colorado where he resided for the remainder of the tax years in issue.

During 2008

– 2013 the foc al point of petitioner’s litigation work

was Denver

, where he maintained his “solo practice” office. Although living in Indiana during 2008

– 2010, he “wasn ’ t generating much business there .” Instead he “w as going back to Denver to try cases and meet with clients ” and did “all [his] business” in Colorado. He was also licensed to practice in New York, but his work there was limited to occasional consulting.3

[* 3 ] II

. Petitioner’s Racing

- Related Activities

Petitioner became involve d in c ar

- related activities in 2005 after he moved to Indiana. He had no record as a lawyer in Indiana and began attending car shows, thinking this might be a way to meet potential clients. He purchased a 30

- year

- old Ferrari for $75,000 and another “collector car

. ” He b egan attending automobile shows as a partici p ant , displaying his collector cars

.
As time went on petitioner found the car shows “a little b i t boring” and became interested in car racing, to which he was introduced by his
next

- door neighbor in Indiana. With his neig h bor ’s assistance he purchased and rebuilt a 2000 Dodge Viper . He prepare d himself for road racing by attending a racing school in Indianapolis

.
Because he “wasn ’ t doing much in the way of law practice” in Indiana , petitioner devoted an increasing amount of t ime to car racing

, which he greatly enjoyed

. He purchased a 2009 Dodge Viper for $102,500 and this became his preferred racing vehicle. He noted that “there’s a sma ll area above th e driver’s w i ndow and the passenger w i ndow where you affix the name of the driver.” A decal for the Avery Law F i rm , his “sponsor,” a ppeared on the back tail of the ca r. Petitioner exp ressed the belief that this signage functioned as “a dve rtising ” for his law practice.

Petitioner had a web page for his “Viper racing team

. ” He explained that this was a “one

- man operation” in which he served as th e driver , mechanic, and sole team member

. One advantage of this arrangement was that he “not only got to associate with other drivers, being in drivers meetings,” but also “got to associate with mechanics by going to mechanics meeti n gs . . . as well as with the administrators of the events.” Th e web page included photographs and videos about his racing and was linked to the Facebook page for his law firm

, which he later renamed “Denver Injury Law.” He expressed the belief that the link to “Viper racing team” might attract potential cl i ents who were victi ms of autom o bile ac cide nts

. Petitioner competed in road racing events at tracks in In di ana, Ohio, Wisconsin, Missouri, Pennsylvania, New York , Colorado, and other venues

. He won “ local championships in the Midwestern region” and at one point “placed as high as Top 10 nationally.” After hi s marriage dissolved

, he allegedly “didn’t have the funds to race.” From that4

[* 4 ] point forward his 2009 Dodge Viper most ly “sat in the garage” in De n ver.

Petitioner believed that being involve d in car racing might enable him t o meet lawyers, doctors, and other professionals who could help his

career. Car racing, he said, was a g ood “con versa tion start er” with these individuals

. But he could identify only two i nstances in which his carr e lated activity actually intersected with his l aw practice

. Through one racing connection he met a Pizza Hut franchisee who had a dispute with

a vendor ; petitioner subsequently “consult[ ed ]” with that franchisee

. Several years previously he had met a surgeon who later served as an expert witness in a pe rso nal inj ury case he tri ed in Denver. But he met that doctor at a n Indiana car show, not at a racing event.

III

. Petitioner’s Tax Filings

Petitioner failed to file returns for 2008 and 2009

, and the IRS accordingly prepared substitutes for return s (SFRs) as authorized by section 6020(b). Petitioner’s returns for 2008 and 2009 were supposed to have been prepared by his then

- wife’s grandfather, a certified public
accountant (CPA). But that CPA had hea lth problems and “got beh ind.”

Petitioner hired a new CPA in 2011 after his wife filed for divorce. He testified that some of his financial records rema i ned in the possession of his original CPA, a nd then of his wife’s d iv orce lawyer . Petitioner claimed tha t the se records were not return ed to him until 2013.

On April 29, 2013, his new CPA prepared and filed delinquent returns for 2010 and 2011, reporting tax of $22,211 and zero, respectively. P etitioner secured an extension of time to file his 2012 return,

see § 6081(a)

, and that return was timely filed on April 29, 2013

, r eporting zero tax due

. P etitioner did not file a return for 2013 by the date prescribed therefor, and the IRS accordingly prepared for 2013 a n SFR on the basis of third

- party reports.

The divorce decree, w hich became final in 2013, required petitioner to pay his ex

- wife $160,000, funds he allegedly had set aside to
pay his past

- due taxes. Petitioner deposited $160,000 into the registry of the divorce court in August 2013 . T hat sum was paid to his ex

- wife in December 2013.

On January 1 4 , 2016, the IRS sent petitioner , by certified mail to his last known address, a notice of deficiency for 2008

, 2009 , and 2013

. Th is notice was bas ed on the SFRs and determin ed de ficiencies of5

[* 5 ] $3,752

, $242,788, and $141,754, respectively, plus additions to tax for failure to timely file

, failure to timely pay , and (for 2009 and 2013) failure to pay estimated tax. See § § 6651(a)(1) and (2) , 6654 (a).

The IRS commenced an examination of petitioner’s 2010

– 2012 returns

. It disallowed for lack of substantiation all deductions claimed on his Schedules C, Profit or Loss F rom Business , and determined unreported gross receipts totaling $345,622 for 20 11 and 2012. On January 14, 2016, the IRS issued petitioner, by certified mail to his last kn own address, a notice of deficiency for 2010

– 2012 that determined deficiencies of $81,687, $154,754, and $6,271, respectively. T he notice determined late

- filing additions to tax for 20 10 and 2011

, see § 6651(a)(1), and

a ccuracy

- related penalties for all three years

, see § 6662(a) . Respondent has conced ed the penalties

, for failure to secure timely supervisor y approval. See § 67 51(b)(1).

On March 29, 2016, petitioner prepared and submitted to the IRS de linquent returns for 2008, 2009, and 2013, and amended returns for 2010

– 2012. On these returns he reported Schedule C gross receipts, Schedule C advertising expenses, adjusted gross income (AGI), and tax liabilities as follows:

Year Gross Receipts Advert is ing Expenses AGI Tax

2008 $21,475 $50,000 ($77,449)

- 0

-
2009 690,815 50,000 488,185 $173,719

2010 72,778 60,000 (85,801)

- 0

-

2011 484,024 60,000 194,909 53,794

2012 51,577 65,000 (104,513)

- 0

-

2013 353,765 70,000 200,152 55,636

In his pretrial memorandum respondent stated that petitioner’s delinquent and amended returns for 2008

– 2013 “were not processed” by the IRS. The trial evidence is consistent with that statement, except with respect to 2009. The cert i fied IRS transcript of petitioner’s 2009 Form 1040 , U.S. Individual Income Tax Return

, and his 2009 TXMODA
account both show that

, on May 15, 2017, the IRS abated $69, 069 of tax for 2009. That is the difference between the tax determined for 2009 in the notice of deficiency ($2 42,788) and the tax reported on petitioner’s delinquent r eturn for that year ($173,719). We thus find that the IRS accepted petitioner’s delinquent 2009 return for filing.6

[* 6 ] IV

. IRS Collection Action

The IRS assessed the tax determined in the notices of deficiency after petitioner failed to petition this Court within 90 days. See § 6213(a). When petitioner did not pay the assessed liabilities on notice and demand

, the IRS commenced collection action. On November 30, 2016, it issued him a Letter 1058, Notice of Intent to Levy and Your Right to a Hearing, for 2008

– 2013. This notice reflected an aggregate unpaid liability of $ 986,794. On December 15, 2016, the IRS issued petitioner a Letter 3172, Notice of F ederal Tax Lien (NFTL) Filing and Your Right to a H earing, for 2008 , 2009, 2010, and 2013.

On December 30, 2016, petitioner timely requested a CDP hearing with respect to both notices. His case was considered by several SOs during 201 7 and 201 8

. H e sought to challenge his underlying tax liabilities for all six years, contending that his correct liabilities were sho wn

on the delinquent and amended returns he had submitt ed i n March 2016

. The SOs verified that the notices of deficiency for 2008

– 2013 had been sent to petitioner by certified mail to his last known address. For that reason, the SOs concluded that he was pr ohibited from disputing his underlying tax liabilities. See § 6330(c)(2)(B). A s a collection alternative p etitioner made an offer

- in

- compromise (OIC) , proposing to compromise his outstanding liabilities for $ 4,277 . He represent ed that he could afford no more than this , having lost his last three personal injury cases and ha ving forfeited most of his assets to his ex

- wife in the divorce

. Believing that petitioner’s aggrega t e liabilities exceeded $ 980 ,000, the SOs viewed his offer wi th disfavor a nd rejected his OI C

.
On Oct ober 22, 2018, the IRS issued petitioner noti ces of determination sustaining the NFTL filings and proposed levies for 2008

– 2013

. He timely petitioned this Court. During trial preparation respondent determined that petitioner h ad not received any of the notices of deficiency , that he was entitled to challenge his underlying tax liabilities, and that the SOs had erred in declining to consider that challenge.

R espondent concluded that petitioner should be allowed the deductions c laimed on his delinquent and amended returns for 2008

– 2013
, except with respect to the advertising expenses reported on the Schedules C. Before trial p etitioner produced documents substantiating alleged advertising expenses of $66,366, of which $14,732 related to hi s racing car activity. Respondent agree s that the difference between these7

[* 7 ] sums, or $51,634, should be allowed as legitimate advertising expenses, with the balance of the purport ed advertising expenses being disallowed, as follows:

Year Reported Advertis ing Expenses Documented Amounts Disallowed Racing Expenses Allowed Expenses
2008 $ 50,000 $2,9 73 $1,8 50 $1,123

2009 50,000 19,122 9,210 9,912
2010 60,000 15,028 2,181 12,847

2011 60,000 28,101 1,491 26, 610

2012 65,000 727

— 727

2013 70,000 415

— 415
Total $ 355,000 $66,3 66 $14,7 32 $51,634

In February 2022 we tried this case remotely via Zoomgov to consider three issues: (1) whether petitioner should be allowed Schedule C advertising expense deductions for 2008

– 2013 in excess of the $51,634 respondent concedes should be allowed; (2) whether petitione r is liable for additions to tax for failure to timely file, failure to timely pay, andfailure to pay estimated tax; and (3) whether the SOs abused their discretion in considering petitioner’s offer of a collection alternative. At the end of tri al we directed the fi l ing of seriatim post

- trial briefs, with resp o ndent’s opening brief due May 9, 20 2 2, and petitioner’s answering brief due Ju ne 8, 2022. Respondent timely filed his brief. Petitioner
tw i ce moved for ex tension s of time to file his brie f. We granted both motions

, extending his time to September 19, 2022. H e did not file a brief by that date or subsequently. 2

OPINIO N

I

. Standard of Review

Sections 6320(c) and 6330(d)(1) do not prescribe the standard of review that this Court should apply in reviewing an IRS administrative determination in a CDP case. The general parameters for such review are marked out by our precedents. Where the validity of a taxpayer’s underlying liability is properly at issue, we review the IRS determin ation de novo. Goza v. Commissioner , 114 T.C. 176, 181

– 82 (2000). Where the taxpayer’s underlying liability is not properly at issue, we review the IRS decision for abuse of discretion only. See id. at 182. Abuse of discretion exists when a

2 Because petitioner failed to file a brief as ordered by the Court, we could enter decision against him for that reason alone. See Rule 123(b). We will nevertheless consider the case on its merits

.8

[* 8 ] determin ation is arbitrary, capricious, or without sound basis in fact or law. See Murphy v. Commissioner , 125 T.C. 301, 320 (2005), aff’d , 469 F.3d 27 (1st Cir. 2006).

A taxpayer may challenge his underlying liability at a CDP hearing if he did not receive a statutory notice of deficiency or did not otherwise have a prior opportunity to dispute his liability

. § 6330(c)(2)(B). Although the IRS sent notices of deficiency to petitioner’s last knownaddress, respondent concedes that petitioner did not receive those notices. He was th u s entitled to dispute his underlying liabilities at the CDP hearing, and his challenge is properly before this Court , subject to de novo review.

II

. Underlying Tax Liabilities

A

. Advertising Expense Deductions

Respondent agrees that petitioner should be allowed the expense deductions claimed on his delinquent and amended returns, except for the advertising expens e s reported on his Sc hedules C. Deductions are a matter of legislative grace, and taxpayers bear the burden of proving their entitlement to any deduction claimed. Rule 142(a); INDOPCO, Inc. v. Commissioner , 503 U.S. 79, 84 (1992). A taxpayer must show that he has met all re quirements for each deduction and keep books or records that substantiate the expenses underlying it. § 6001; Roberts v. Commissioner , 62 T.C. 834, 836 (1974). Failure to keep and present such records counts heavily against a taxpayer’s attempted proof. Rogers v. Commissioner , T.C. Memo. 2014

- 141, 108 T.C.M. (CCH) 39, 43.

On his delinquent and amended returns for 2008

– 2013 petitioner claim ed in connection with his Schedule C business $355,000 of deductions for advertising expenses, all reported i n round

- dollar amounts. R espondent concedes that petitioner has substantiated $51,634 of genuine advertising cost s. Petitioner urge s that t he $303,366 balance should also be allowed , contending that it corresponds to expense s he incurred in conducting a racing car activity, which he says promoted his litigation practic e.

Before trial petitioner submitted documents to respondent that substant iat ed $14,732 of car racing expenses. At trial petitioner submitted document s reflec ting $121,60 7 of additional car

- related expenses. These consist of the purchase price for his 2009 Dodge Viper ($102,500) plus payments during 2009

– 2012 for parts and labor in connection with that vehicle ($19,10 7 )

. We will assume arguendo that some9

[* 9 ] or all of the capital cost of the Dodge Viper was potentially recoverable during 20 0 9

– 2013 as depreciation expense s

. Even with that allowance , p etitioner ha s fai led to provide any substantiation whatsoever for $167,02 7 of his claimed car racing expenses ( $303,366

– [$14,732 + $121,60 7 ] = $167,02 7 ) , and we hold that respondent has properly declined to allow that portion

. With respect to the costs petitioner did substantiate, s ection 162(a) allows the deduction of “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. ” A taxpayer must show, not only that he incurred the item in questi on, but also that it was an ordinary and necessary expense of the particular business in which he was engaged. Commissioner v. Lincoln Sav

. & Loan Ass’n , 403 U.S. 345, 3 5 2 (1971)

. An expense is “ordinary” if “the transaction which gives rise to it [is] o f common or frequent occurrence in the type of business involved.” Deputy v. du Pont , 308 U.S. 488, 495 (1940); Welch v. Helvering , 290 U.S. 111, 113

– 14 (1933). A necessary expense is on e that is “ appropriate and helpful ” in carrying on the taxpayer’s profit

- seeking activity

. Welch v. Helvering , 290 U.S. at 11 3 ; Heineman v. Commissioner , 82 T.C. 538, 543 ( 1 9 84 )

. In determining whether an expense is “ordinary and necessary” within the meaning of section 162(a), the courts have focused on the taxpayer’s primary motive for incurring the expense and on whether there i s a reasonably proximate relationship between th e expense and the taxpayer’s occupation

. See, e.g.

, O’Connor v. Commissioner , 653 F. App ’ x 633, 638 (10th Cir. 2016)

, aff ’ g on this issue T.C. Memo. 2015

- 155 ; Walliser v. Commissioner , 72 T.C. 433, 437

– 38 (1979); Henry v. Commissioner, 36 T.C. 879, 884 (1961); Berry v. Commissioner , T.C. Memo. 2021

- 42, 121 T.C.M. (CCH) 1292, 1295. If an expenditure is primarily motivated by personal considerations, no deduction is allowed. Berry , 121 T.C.M. (CCH) at 1295 (citing Henry , 36 T.C. at 884 )

. We agree with respondent that petitioner ’s racing

- related costs
were not ordinary and necessary expenses of his busin ess as an attorne y. It is n either “ necessary ” nor “common” for attorneys to incur such
costs. Petitioner greatly enjoyed car racing, which he found more exciting than his previous hobby of acquiring collector cars and participating in car shows. But we find that both activities were hobbies

. N o deduction is allowed for personal expenses of this k ind. See § 262(a) (disallowing deductions for “personal, living, or family expenses”).10

[* 10 ] During the tax years at issue petitioner ’s litigation practice was conducted almost exclusively in Colorado, where he met with clients and did “all [his] business

. ” But most of his racing activity occurred during 2008

– 201 0 , when he lived in Indiana. He raced on t racks in Indiana, elsewhere in the Midwest, a nd on the East Coast. He did not convince us that racing at these venues had any synergy with his Denver

- based litigation practice.

If petitioner genuinely viewed car racing as a form of advertising,

one might expect that he would have ramp ed up this activity (or at least maintain ed it ) when he returned in late 2010 to Colorado

, the main market for hi s legal services

. Bu t he ackn owledged that his 2009 Dodge Viper mostly “sat in the garage” after he returned to Denver. In his pre

trial submissions he documented only $1,491 of racing

- related expenses in 2011 and zero expenses during 2012 and 2013. A nd the documents he p ro duced at trial showed only $546 of car

- related expenses for 2012 and zero for 2013.

Even if petitioner had raced in the relevant market, we would not find his expenses to be legitimate advertising expenses. His name and a decal for his law firm appeared in relatively small print on his Dodge Viper. This form of “signage” is at the opposite end of the spectrum from (sa y) a billboard or a newsp aper ad. Indeed, every driver’s name typically appeared on his or her racing car . Petitioner has offered n o reason why he should have a stronger claim to an advertising expense than thousands of other driver s

.
Petitioner alleged ly believed that being involved in car racing would enable him to meet lawyers, doctors, and other professionals who could help his career. But he could identify only on e instance

— involving a Pizza Hut franchisee

— in which his racing activity actually inte rsected with his l aw practice . A nd that relationship did n ot lead to any personal injury litigation, but only to “ consultation ” about a vendor dispute.

Petitioner t estified that he found c ar racing to be a good “conversation starter” w hen meeting with other professionals. But innumerable sports and hobbies could serve the same function

— a pastime that a

person might enjoy and share with other people, possi bly leading to eventual business relationships

. That possibility does not convert the costs of pursuing a hobby into deductible advertising expenses. We accord i ngly find that petitioner has failed to carry his burden of proving11

[* 11 ] that he is entitled to deduct advertising expenses in excess of $51,634, the amount respondent has conc eded for 2008

– 2013. 3

B

. Additions to Tax

1

. Failure to Timely File

Section 6651(a)(1) provides for an addition to tax of 5% of the tax required to be shown on the return for each month or fraction thereof for which there is a failure to file the retur n, not to exceed 25% in tot al

. Respondent determined additions to tax under this provision for 2008

– 2011 and 2013. An i ndividual taxpayer is generally required to file a return for a given year by April 15 of the following year

, see § 6072(a)

, or by October 15 if an extension was secured, see § 6081(a) ; s ee also § 7503 ( extend ing the deadline until the following business day if th e d ue date falls on a weekend or a legal holiday).

Respondent has th e burden of production on this issue. See § 7491(c). Petitioner filed his 2010 and 2011 returns on April 29, 2013, more than a year late. He did not submit returns for 2008, 2009, and 2013 until March 2016. Respondent has thus satisfied his burden to

s how that petitioner did not file returns timely for these five years.

The addition to tax for late filing does not apply if the taxpayershows that his failure was “due to reasonable cause and not due to willful neglect.” § 6651(a)(1). “If the taxpayer exercised ordinary business

ca r e and prudence and was nevertheless unable to file the return within the prescribed time, then the delay is due to a reasonable cause.” Treas. Reg. § 301.6651

- 1(c)(1). The taxpayer can show that he did no t act with “willful neglect” if he can “prove that the late filing did not result from

3 This case is distinguishable from prior case s

— e.g., in volving car dealerships, construction companies, and companies engaged in the sale and leasing of aircraft

— in which we found car or motorcycle racing expenses to be deductible advertisi ng costs

. See, e.g.

, Evans v. Commissioner, T.C. Memo. 2014

- 237 , 108 T.C.M. (CCH) 554 ; Ciaravella v. Commissioner , T.C. Memo. 1998

- 31 , 75 T.C.M. (CCH) 1635 ; Boomershine v. Commissioner , T.C. Memo. 1987

- 384 ; Lang Chevrolet Co. v. Commissioner , T.C. Memo. 1967

- 212. In several of these cases, the fact that unrelated spons o rs compensated the driver for displaying their logos confirmed the seriousness of the racing activity. See Evans

, 108 T.C.M. (CCH) at 557 ; Ciaravella

, 75 T.C.M. (CCH) at 1638. In each of those cases we found as a fact that there ex i sted “a proximat e relationship between the expenditure and the business of the tax p ayer.” See, e.g.

, Evans

, 108 T.C.M. (CCH) at 557 ; Ciaravella , 75 T.C.M. (CCH) at 1640

. Petitioner has not carried his burden of proving any such “proximate relationship” here. And the evidence conclusively showed that he engaged in car racing primarily for personal enjoyment , not to advertise his legal services.12

[* 12 ] a ‘ conscious , intentional failure or reckless indifference. ’ ” Niedringhaus v. Commissioner , 99 T.C. 202, 221 (1992) (quoting United States v. Boyle , 469 U.S. 241, 245

– 46 (1985)). The burden of showing reasonable cause under section 6651(a) ( 1) is upon petitioner. See Higbee v. Commissioner , 116 T.C. 438, 447

– 48 (2001)

. Petitioner offered no excuse for filing his 2013 return two years late. He testified that his t hen

- wife’s grandfather, who was supposed to have prepared the 2008 and 2009 returns, had health problems and “got behind.” But as the Supreme Court has held, taxpayers have a personal, nondelegable duty to file tax returns on time. See Boyle , 469 U.S. at 249(“Congress intended to place upon the taxpayer an obligation to ascertain the statutory deadline and then to meet that deadline

. . . . ”). Petitioner cannot seek shelter in inattention or neglect on the part of his CPA. See id. at 252; Shaw v. Commissioner , T.C. Memo. 2013

- 170, 106 T.C.M. (CCH) 54, 59 ( rul ing that reliance on a tax professional “cannot constitute ‘reasonable cause’ for a late filing ” when the return’s due date “is obvious to the taxpayer”)

, aff’d , 623 F. A pp’x 46 7 (9th Cir. 2015)

.
Petitioner contends that his 2010 and 2011 returns were filed late because his financial records were in the possession of his original CPA, and then of his ex

- wife’s divorce lawyer, until sometime in 2013. We do not find this excuse credible . Virtually all of his income consisted of receipts from his law practice. It is hard to believe that he did not have enough knowledge of what those receipts were to enable him to file a tax
return. In any event, it is well settled that taxpayers must f ile timely income tax returns on the basis of the best information available to them at the time, and the n file an amended return if necessary. Estate of Vriniotis v. Commissioner , 79 T.C. 298, 311 (1982)

. We accordingly conclude that he is liable for th e late

- filing addition to tax for all five years.

2

. Failure to Timely Pay

Section 6651(a)(2) provides for an addition to tax when a taxpayer fails “ to pay the amount shown as tax on any return . . . on or before the date prescribed for payment of such tax.” To meet his burden of production for this addition to tax, respondent must establish that the unpaid amount was “shown as tax on [a] return.” § 6651(a)(2); s ee Wheeler v. Commissioner

, 127 T.C. 200, 208

– 10 (2006), aff’d , 521 F.3d 1289 (10th Cir. 2008). An SFR that meets the requirements of section 6020(b) may be treated as the “return” filed by the taxpayer for this purpose. See § 6651(g)(2).13

[* 13 ] The IRS determined late

- payment additions to tax for 200 8, 2009,and 2013, the years for which it issued notices of deficiency after receiving no return from petitioner. Although these notices were evidently based on SFRs, respondent did not introduce copies of the SFRs into evidence at trial. To satisfy his burden of production, respondent relies instead on the delinquent returns petitioner submitte d to the IRS in March 2016. However, the evidence establi shes that only one of these
returns

— the delin quent return for 2009

— was actually accepted by the IRS for filing. Petitioner’s delinquent return for 2009 showed tax due of $173,719 , and he does not dispute that he failed to pay the tax shown as due on th at return. We acc o rdingly conclude that respondent has met his burden of production for 2009 , but not for 2008 or 2013.

The addition to tax for failure to pay does not apply if the taxpayershows that his failure was “due to reasonable cause and not due to willful neglect.” § 6651(a)(2) ; see H igbee , 116 T.C. at 447. To prove reasonable cause the taxpayer must show that he exercised ordinary business

care and prudence in providing for payment of his tax liability but nevertheless was either un able to pay the tax or would have suffer ed undue har dship if he had paid the tax on the due date. Treas. Reg. § 301.6651

- 1(c)(1). The determination of whether the taxpayer had reasonable

cause under section 66 5 1(a)(2) is similar to the analysis under section 6651(a)(1)

, except that undue financial hardshi p may be a defens e in th e former case

. See Russell v. Commissioner

, T.C. Memo. 2011

- 81, 101 T.C.M. (CCH) 1363, 1367 n. 9

. To establish undue hardship, the taxpayer must show that making the tax payment on time would have created “the risk of a substantial financial loss.” Merriam v. Commissioner

, T.C. Memo. 1995

- 432, 70 T.C.M. (CCH) 627, 636
, aff’d without published opinion , 107 F.3d 877 (9th Cir. 1997)

. In seeking to establish reasonable cause, petitioner contends that he had set aside $160,000 to pay his past

- due taxes, but that he was required to pay this sum to his ex

- wife in December 2013 when his divorce became final. The failure to pay for 2009, however, occu r red on April 15, 2010, “the date prescribed for payment” of hi s 2009 tax. See § 6651(a)(2) ; Estate of Hartsell v. Commissioner , T.C. Memo. 2004

- 211, 88 T.C.M. (CCH) 267, 269 (ruling that “reasonable cause” is a “one

- time test to be passed or failed at the payment due date”); Merriam

, 70 T.C.M. (CCH) at 636

.
Petitio ner did not pa y $ 160,000 i nto the regi stry of the divorce court until August 2013 . H e supplied no evidence that these funds were unavailable in April 2010 for payment of his tax

. His AGI for 2009,14

[* 14 ] moreover, was $488,18 5. D uring that year he evi dently felt sufficient ly confident in his financial position to purchase a racing car for $102,500

. All in all, he has not convinced us that paying his 2009 tax on the due date w ould have created “the risk of a substantial financial l oss.” Merriam , 70 T.C.M. (CCH) at 636. We accordingly find that he is liable for a late

- payment addition to tax for 2009

.

3

. Failure to Pay Estimated Tax

Section 6654 (a) imposes an addition to tax on an individual who underpays his estimated tax. Th is addition to tax is calculated with reference to four required installment payments of the taxpayer’s estimated tax liability. § 6654(c) and (d). However, no addition to t ax is imposed if the taxpayer is U.S. citizen (as petitioner is) who “did not have any liability for tax for the preceding [12

- month] taxable year.” § 6654(e)(2).

The IRS determined addition s to tax under section 6654 for 2009 and 2013

. Petitioner’s deli nquent returns for 2008 and 2012

— preparedon the assumption that he was entitled to Schedule C advertising deductions of $50,000 and $65,000 respectively

— showed zero tax due. Respondent represents that he will recalculate or concede petitioner’s liabilit i es for the section 6654 additions to tax depending on the amount of his 2008 and 2012 tax liabilities, as redetermined consistently with this Opinion.

III

. Abuse of Discretion

In deciding whether the SOs abused their discretion we consider whether they (1 ) properly verified that the requirements of applicablelaw or administrative procedure were met, (2) considered relevant issues petitioner raised, and (3) considered “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of [petitioner] that any collection action be no more intrusive than necessary.” See §§ 6330(c)(3), 6320(c).

As a collection alternative petitioner proposed an OIC offering to compromise his outstanding liabilities for $4,277. Because the SOs declined to permit an underlying liability challenge, petitioner did not have an opportunity to present collection alternatives keyed to what his actual tax liabilit ies were . Respondent accordingly requests that, after deciding th e liability issue, we remand this case to the IRS Independent Office of Appeals for a supplemental hearing to consider “offers of collection alternatives.” See § 6330(c)(2)(A)(iii). We will grant that request.15

[* 15 ] To implement the foregoing,

An appropriate order will be issued.