T.C. M em o . 2 0 1 8 -1 1 1

UNITED STATES TAX COURT

D ARRELL ARCHER, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo s . 1 0 4 4 4 -1 6 , 1 2 41 4 -1 6
. Fi l edJ u l y 1 6, 2 0 18
.
Darrel l Arch er, p ro s e. J as o n T. Sco ttan d Ni ch o l as R. Ro s ad o , fo r res p o n den t .

M EM ORANDUM FINDINGS OF FACT AND OPINION COHEN, Ju d g e: Ins ep arat e s t atut o ry n o t i ces , res p o nd en td et erm i n ed d efi ci en ci es o f $ 5 ,4 2 2 an d $ 1 5 ,8 0 3 an d s ect io n 6 66 2 (a) p en al t ies o f $ 1 ,0 8 4.4 0 an d $ 3 ,1 6 0 .6 0 i n rel at i o n t o p et i t i o ner’ s Fed eral i n co m e t ax fo r 2 0 1 3 an d2 0 1 4 , res p ect i vel y . Fo r 2 0 14 , res p o n d en tal s o d et erm i n edth atp et i t i o n er was l i ab l e fo r a $ 6 9 2 .6 5 s ect i o n 6 6 5 1(a)(1 ) l at e-fi l i n g ad d i t i o n t o t ax . Sep arat e p et i ti o n s were- 2
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[* 2 ] fi led , b u tth es e cas es were co n s o l i d at edfo r t ri al , b ri efi ng , an do p i n i o n . Th e i s su es fo r d eci s i o n are wh et h er p et i ti o n er i s en t i t l edt o b us i n es s ex p en s e d educt i o n s , real es t at e l o s s d edu ct i o n s , an dch ari t ab l e co n tri b ut i o n d edu ct i o n s fo r th e y ears i n i s s u e, an dwh et her h e i s l i ab l e fo r th e accu racy -rel at edp en al ti es an d th e l at e-fi l i n g ad d i t io n t o t ax . Al l s ect i on referen ces are t o the In t ern al Rev en u e Co d e (Co d e) i n effect fo r t h e y ears i n i s su e, an dal l Ru l e referen ces are t o t h e Tax Co u rtRu l es o f Pract i ce an dPro cedu re. FINDINGS OF FACT No rm al l y we o rg an ize o ur fi n d i n g s o f fact ch ro n o l og i cal l y . Becau s e t h e
reco rdi s s k et ch y

as t o p et i t i on er’ s act i v i t i es du ri n g 2 0 1 3 an d 2 0 1 4 , o u r fi n d i n g s as t o p et i ti o n er’ s act i v it i es , h i s t ax rep o rt i n g , an dth e d o cu m en t at i o n th ath e p ro du ced du ri n g th e ex am i n at i o n an dattri al h av e b een co m b i n edan d o rg an i zedb y s ub ject
m at t er. Bu s i nes s Act i v i t i es Pet i t i o ner res i dedi n Val l ejo , Cal ifo rn i a, atth e t i m e h e fi l edh i s p et i t i o n s . Du ri n g 2 0 1 3 an d2 0 1 4 h e at t em p t ed t o s el l p ro duct s o n li ne u n der t h e n am e Erro r Hel p ers (m ark et i ng act i vi ty ). Becau s e h e l ack edco m p u t er kn o wl ed g e an d d i dn o t kn o w h o w t o creat e web p ag es an dad v ert i s e, h e rel i edo n h el p fro m h i s s on Dav id , wh o l i v edi n M ai n e, an dh i s g ran d s o n J ak e, wh o l iv edi n Lo s An g el es .- 3
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[* 3 ] Ho wev er, t h e b u s i n es s “ fad edo u t ” i n 2 0 1 4 . Duri n g 2 0 1 3 an d2 0 1 4 h e i n cu rredcred i tcardch arg es fo r “ ad v ert i si n g ” o n v ari o u s i n t ern etp ro vi d ers . Pet i t i o ner was al s o en g ag edi n a co n s tru ct i o n act iv i ty i n Taft , Cal i fo rn i a, t o wh i ch h e t rav el edfro m hi s h o m e i n Val l ejo . Pet i t i o n er wo rk edfo r a few p eo p l e h e kn ew an dd i dn o tp rep are i n vo ices o r g i v e an y recei pt s fo r t h e am o u n t s th ath e was p ai dfo r t h e co n s tru ct i o n wo rk
. Pet i t i o ner rep o rt edh i s m ark et i n g act i v i ty an d h is co n s tru ct i on act i v i ty o n a
s i ng l e Sch edu le C, Pro fi to r Lo s s Fro m Bu s i n es s , fo r each o f 2 0 1 3 an d2 0 1 4 . He rep o rt edt o t al l o s s es o f $ 2 5 ,2 0 3 fo r 2 0 1 3 an d$ 3 6 , 1 72 fo r 2 01 4
. Th e
s ub s t an t i at i o n p et i t i o n er o ffered i n rel at i o n t o h i s b u s i n es s ex p en s es i n cl u d ed
an n ot at edcred i tcards t at em en t s o n wh ich h e ci rcl edan dt o t al edm o s ti tem s th ath e d educt edas trav el ex p en s es . Th e cred i tcards t at em en t s i n cl u dedch arg es fo r
o b v i o u s l y p ers o n al i t em s an dch arg es at tri bu t ed t o J aco b Arch er, Pau l Arch er, M i ch ael Arch er, an d Beat ri ce Arch er. Pet i t i o ner d i dn o tp ro du ce a co n tem po ran eo u s reco rdo f h i s au to an dtru ck trav el . Onh i s h an dwri t t en reco n s tru ct i o n h e d i d n o ts eg reg at e ex p en s es fo r h i s trav el t o co n s tru ct i o n s i tes in Taftfro m ex pen s es fo r “ co n feren ces ” wi th

“ affi l i at es ” i n Ecu ad or, Las Veg as , Can ad a, Vi rg i n i a, M ai n e, an dFl o ri d a. He rep o rt edas ex pen s es rel at edt o h i s co n s tru ct i o n b u s i n es s m eal s i n Bak ers fi el d ,- 4
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[* 4 ] Cal i fo rn i a, ap p ro x i m at el y 4 0 m i l es fro m

Taft . Dedu ct edi t em s i n cl u ded $ 1 ,0 8 6 .6 0 fo r ai rl i n e t i ck et s p u rch as edAp ri l 1 5 , 2 0 1 3 , fo r ro u n dt ri p trav el o f J aco b Dav i d Arch er b et ween Ban g o r, M ai ne, an dSan Fran ci s co , Cal ifo rn i a. Pet i t io n er d educt edas co n tractl ab o r ex p en s es fo r 2 0 1 3 $ 7 ,5 50 p ai dt o h i s s o n Dav idan dh i s g ran d s o n J ak e. He d edu ct edco n tract l ab o r ex p en s es o f $ 6,3 1 0 fo r 2 0 1 4 . He d edu ct edo ffi ce ex p en s es o f $ 3 ,2 0 0 fo r 2 0 13 an d $ 3 , 3 1 2 fo r 2 0 1 4 . He d educt edl eg al an d p ro fes s i o n al ex p en s es o f $ 5 ,0 00 fo r 2 0 1 3 (o f wh i ch $ 4 ,0 0 0 was al l o wed in th e s t atu t o ry

n ot i ce) an d$ 1 6 , 8 25 fo r 2 01 4
. He d edu ct edad v ert i s i n g
ex p en s es o f $ 10 , 4 2 5 fo r 2 0 1 3 an d$ 1 0 ,3 1 4 fo r 2 0 1 4. Les s er am o u nt s were d educt edfo r rep ai rs an dm ai n t en an ce, i n s uran ce, u t i l i ti es , an dm i s cel l an eo u s i t em s fo r each y ear. Ren tal Act i v i t i es Pet i t i o ner o wn eds ev eral ren t al p ro p ert i es du ri n g 2 0 13 an d2 0 1 4 . He
o ccas i o n al l y

m ad e t ri p s t o co n du ctm ai n t en an ce o n th o s e p ro p ert i es . Pet i t io n er d educt edl o s s es t o t al i n g $ 1 5 , 8 7 6 o n Sch edu l e E, Sup p l em en t al In co m e an dLo ss , fo r 2 0 1 3 . Th o se l o s s d edu ct io n s were n o td i s al l o wed i n t h e s t atu t o ry n o t ice fo r 2 0 1 3 . He d edu ct edren t al l o s s es o f $ 1 1 ,8 81 o n h i s retu rn fo r 2 0 1 4 . Th e l o s s d educt i o n s i n cl u d edex p en s es i n cu rredfo r m il es dri ven b et ween h i s h o m e an dth e
ren t al p ro p ert i es , b u th e d i dn o tp ro du ce a co nt em p o ran eo u s l o g , a cal en d ar, o r- 5
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[* 5 ] recei p t s t o s ub s t an t iat e t h e d i st an ce t h at h e es t im at es h e d ro v e. As
s ub s t an t i at i o n fo r t he 2 0 1 4 ren t al l o s s es h e p ro v i d edco p ies o f a cred i tcard
s t at em en tan dch eckb o o k l ed g er en tri es refl ect i n g p aym en ts fo r real es t at e t ax es
an d p aym en t s t o i n d i v idu al s th ath e d i dn o t o th erwi s e i d en t i fy . Th e ren t al l o s s d educt i o n fo r 2 0 1 4 was d i s al l o wedi n the s t atu t o ry n o t i ce wi th th e ex p l an at i o n th at

“ [s ] i n ce y o ud i d n o tes t ab l i s h th atthe am o u n ts h o wn was (a) l o s s , an d(b )
s u s t ai n edb y y o u , i ti s n o td edu ct ib l e.” In th e n ot i ce p et i t i o n er’ s ad j u s t edg ro s s i n co m e fo r 2 0 14 was cal cu l at edas $ 9 7 ,2 5 2
. Ch ari t ab l e Co n tri b u t io n Deduct i o n s OnSch edu l es A, It em i zedDedu ct i o ns , at t ach edt o h is retu rn s p et i t i o n er cl ai m edcas h an d n o n cas h ch ari t ab l e co n tri b ut i o n d edu ct io n s . Fo r 2 0 1 3 h e rep o rt edcas h co n tri b u t i o ns o f $ 5 ,2 0 0 an dn o n cas h co n tri b ut i o n s o f $ 2 , 6 5 0 , an d fo r 2 0 1 4 h e rep o rt edcas h co n tri b u t i o n s o f $ 5,6 5 0 an dn o n cas h co n tri b u t i o n s o f $ 3 ,7 4 9 . He d i d n o tp ro du ce can cel edch eck s o r recei p t s fo r th e cas h co nt ri b u t i o n s . Fo r n on cas h co n tri bu t i o n s rep ort edfo r 2 01 4 , h e p ro du cedfo rm s p ro v id edb y th e reci pi en t th ath e fi l l edo u th i m sel f, o n wh i ch h e es ti m at ed v al ues b u td i dn o t d es cri b e an y

d o n at edp ro pert y

o th er t h an as “b ag s /b o x es ” an d “ l arg e h o u s eh o l d i t em (s )”, an dwh i ch were d at edi n 2 0 1 3
. Fo r 2 01 3 the o n ly ad ju s t m en t t o i t em i zed d educt i o n s i n th e s t atu t ory n o t i ce was b as edo n ch an g es t o p et i t i o ner’ s ad ju s t ed- 6
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[* 6 ] g ro s s i n co m e. Fo r 2 0 1 4 $ 9 ,3 9 9 o f cl ai m edi tem izedd edu ct io n s was d i s al lo wedi n th e s t atu t o ry n ot i ce. Tax Ex am i n at io n Pet i t i o ner p rep aredh i s retu rn fo r each y ear wi th ou ts eek in g p ro fes s i o n al h el p . As a res u l to f t h e l o s ses rep o rt edo n Sch edu l es C an dE an dth e d edu ct i o n s cl ai m edo n Sch edul es A, p et i t i o n er rep o rt edt ax l i ab i l i t i es o f zero fo r 2 0 13 an d 2 0 1 4 . Hi s 2 0 1 4 retu rn was fi l edl at e, o n Ap ri l 2 7 , 2 0 1 5 . Hi s retu rn s were s el ect ed fo r ex am i n at i o n b y

th e In t ern al Rev en u e Serv ice (IRS). Th e IRS t ax s p eci al i s t ex am i n er (ex am i n er) wh o co n du ct edth e ex am i n at i o n
o f p et i ti o n er’ s retu rn s fo r 2 0 13 an d2 0 1 4 p ro p o sedi m p o s i n g the s ect i o n 6 6 6 2 (a) p en al ty fo r each y ear. On Sep tem b er 1 8 , 2 0 1 5 , th e ex am i n er’ s th en -i m m ed i at e
s up erv i s o r ap p ro v edi n wri ti n g as al t ern at i v es th e s ub s t an t i al u n d ers t at em en to r
n eg li g en ce p en al ty fo r 2 0 1 3
. Th e s t atu t o ry n o t ice fo r t h aty ear was s en t Feb ru ary 2 , 2 01 6 . OnJ an u ary 2 1 , 2 01 6, th e ex am i n er’ s th en -i m m ed i at e s up erv i so r ap p ro v edi n wri ti n g the s ub s t an t i al u n d ers t at em en tp en al ty fo r 2 0 1 4 . Th e s t atu t o ry
n o t i ce fo r t h aty ear was s en tFeb ru ary 2 2 , 2 0 1 6
. OPINION Th e t ax p ay er h as th e b u rd en o f p ro vi n g en t i t l em en tt o h i s o r h er d edu ct i o n s cl ai m ed . See New Co l o ni al Ice Co . v . Hel v eri n g , 2 9 2 U.S. 4 35 , 4 4 0 (1 9 34 );- 7
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[* 7 ] Sp ark m an v . Co m

m i s s i o n er, 5 0 9 F.3 d 1 1 4 9 , 1 1 5 9 (9 th Ci r. 2 00 7 ), aff’ g T.C. M em o. 2 0 0 5 -1 3 6 ; Ro ckwel l v . Co m m i s s i o n er, 5 1 2 F.2 d 8 8 2, 8 8 6 (9 th Ci r. 1 9 7 5 ), aff’ g T.C. M em o . 1 9 7 2 -1 3 3 . Tax p ay ers are req u i redt o m ai n tai n s u ffi ci en treco rd s t o es t ab l i s h th e am ou n tan dp u rp o s e o f an y d edu ct io n . Sec. 6 00 1 ; Hi g b ee v . Co m m i s s i o n er, 1 1 6 T.C. 4 3 8 , 4 4 0 (2 0 0 1); s ec. 1
. 6 00 1 -1 (a), (e), In co m e Tax Reg s. Pet i t io n er h as n ots at i s fi edth e co n di t i o n s fo r s hi ft i ng th e b u rd en o f p ro o f u n d er
s ect i on 7 4 9 1 (a) b ecau se h e fai l edt o m ai nt ai n req u i redreco rd s o r t o p res en t cred i b l e ev i d en ce t h at h e was en t i t l edt o th es e d edu ct i o ns . Res p o n den th as th e b u rd eno f p ro du ct i o n wi th res p ectt o p en al t i es an d ad d i t io n s t o t ax . See s ec. 7 4 9 1 (c). Sch edu l e C Ex p en s es Sect io n 1 6 2 (a) al l o ws as a d edu ct i o n “ al l th e o rd i n ary an dn eces s ary
ex p en s es p ai d o r i n cu rreddu ri n g the t ax ab l e y ear i n carry in g o n an y trad e o r b u s i n es s ”. Anex p en s e i s o rd i n ary i f i ti s n o rm al , u su al , o r cu s t o m ary i n th e t ax p ay er’ s trad e o r b u s i n es s , an di ti s n eces s ary i f ap pro p ri at e o r h el p fu l fo r s u ch b u s i n es s . See Dep u ty

v . duPo n t , 3 08 U.S. 4 8 8 , 4 9 5 (1 9 4 0 ); s ee al s o Li n g ren v . Co m m i s s i o n er, T.C. M em o . 2 0 1 6 -2 1 3 . Cert ai n ex p en s es , i n cl u d in g trav el , m eal s , en t ert ai n m en t , an d v eh i cl e ex p en s es , are s ubjectt o th e h ei g h t en eds ub st an t i at i o n req u i rem en t s o f s ect i o n 2 7 4 (d ). Th e s ub s t an t iat i o n req u i redi s “ ad equ at e reco rd s- 8
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[* 8 ] o r b y s u ffi ci en tev i d en ce co rro b o rat i n g th e t ax pay er’ s o wns t at em en t ” t h e
am ou n t , t i m e, p l ace, an db u s i n es s p urp o s e o f t h e ex p en s e. Sec. 2 7 4 (d ) (fl u s h l an g u ag e). Pers on al , l i v i n g , an dfam i l y ex p en s es are n o td educt i b le. Sec. 2 6 2 (a). Pet i t i o ner d i dn o tp ro du ce an y th i rd -p art y

i n v o i ces , can cel edch eck s , o r
co n tem p o ran eo u s l o g s t o s ub s tan t i at e t h e b u s i n es s p u rp o s e o f t he am o u nt s rep o rt ed . He p ro du cedn o co rro b o rat i n g wi tnes s es . Hi s ev i d en ce co n s i s t edo f
an n ot at edco p ies o f cred i tcards t at em en t s , a few b an k s t at em en t s , recei p t s s i g n ed b y h i s s o n , an dh i s o wn h an dwri t t en n o t es . He t es ti fi ed th ath e wen to v er h i s cred i tcards t at em en t s an dad d edup ch arg es thath e d et erm i n edwere rel at edt o h i s b u s i n es s . He p res en tedn o ev id en ce t h ath e was en t i t l edt o d edu ctex pen s es rel at i n g t o th e u s e o f h i s h o m e i n co m p l i an ce wi th s ect i o n 2 8 0 A(c)(1 ) o r (2 ), wh i ch p ro v i des ex cep t io n s t o th e p ro h i b i t io n o f d educt i o n s wi th res p ectt o a t ax p ay er’ s res i d en ce. He m erel y as s ert ed th ath e h add edu ct ed two -t h i rd s o f t h e
u t i l i t i es as h i s es t im at e fo r u s e o f t h e p ro p ert y fo r b u s in es s . Pet i t i o ner’ s t es t i m o n y an dth e h an dwri t t en an dty pedn o tes th atwere
s t ip u l at edex h i b i t s are m erel y h i s co n t en t io n s , an dh i s as s ert i o n s t h atth e l arg e
am ou n t s cl ai m edas d edu ct i o ns rel at edt o an am o rp h o us b u s i n es s act i v i ty are i m p ro b ab l e, i m

p l au s i b l e, an du n rel i ab l e. Th e am o u n t s h e cl ai m edas d educt i o n s
were reco n s tru ct edes t i m at es , d i s p ro p o rt i o n at e i n am ou n t t o h i s rep o rt edi n co m e,- 9
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[* 9 ] an d qu es ti o nab l e as t o p u rp o s e. W e are n o treq u i redt o accep ts u ch t es t i m o ny . See Gei ger v . Co m m i s s i o n er, 4 4 0 F.2 d6 8 8 , 6 89 -6 9 0 (9 th Ci r. 1 9 7 1 ), aff’ g T.C. M em o . 1 9 6 9 -1 5 9 ; Sh ea v . Co m m i s s i o n er, 1 1 2 T.C. 1 8 3 , 1 8 9 (1 9 9 9 ). “ A t ax p ay er’ s g en eral s t at em en tthath i s o r h er ex p en s es were i ncu rredi n p u rs u i to f a trad e o r b u si n es s i s n o t s u ffi ci en tt o es t ab l i s h th atth e ex p en ses h ada reas o n ab l y d i rect rel at i o n sh i p t o an y s u ch trad e o r b u si n es s.” Ho p k i n s v . Co m m i s s i o n er, T.C. M em o. 2 0 0 5 -4 9 , s l i p o p . at1 6
. Pet i t i o ner arg u es i n p o s t tri al fi l i n g s th atth e ex am i nat i o n an dco u n s el ’ s tri al p rep arat i o n fai l ed t o s o l ici tthe i n fo rm at io n n eces s ary fo r h i m t o es t ab l i s h th at
ex p en s es were i n cu rred fo r b u s i n es s p u rp os es , b u t p res en t i n g p ro o f was p et i t i o n er’ s b u rd en . He recei v edad equat e n o t i ce o f wh atwas d i s p u t ed
. Hi s t es t i m o ny an d h i s b ri ef em

p h as i ze h i s s ub

ject iv e b el i ef th at “ ev ery

d edu ct i o n th atI
m ad e I b el i ev edt o b e anab s o l u t e l eg i t i m at e d edu ct i o n. A d edu ct io n th atI d es erv edan ds h ou l dt ak e”. Su ch t es t i m o n y d o es n o tcarry h i s b u rd en . See Gei g er
v . Co m m i s s i o n er, 4 4 0 F.2 dat6 9 0
. Pet i t i o ner d i dn o tk eep tracko f t h e h o u rs h i s s o n o r g ran d s o n wo rk edo r t h e
s erv i ces th ey

p erfo rm ed . Wh ere a fam i l y rel at i o ns h ip i s i nv o l v ed , cl o s e s cru t i n y i s ap p li edt o d et erm in e wh et h er p aym en t s t o o r o n b eh al f o f a t ax p ay er’ s ch i l dren are
o n acco u n to f anem

p l o ym en t rel at i o n s h i p o r t h e fam i l y rel at i on s h i p an dwh et h er- 1 0 -

[* 1 0 ] th e am o un t s p ai d are reas o n ab l e fo r t h e wo rkp erfo rm ed . Den m an v . Co m m i s s i o n er, 4 8 T.C. 4 39 (1 9 6 7 ); s ee Haed er v . Co m m i ss i o n er, T.C. M em o . 2 0 0 1 -7 ; J en k i n s v . Co m

m i s si o ner, T.C. M em o . 1 98 8 -2 9 2, aff’ dwi th o utp ub l i s h ed
o p i n i o n , 8 8 0 F.2 d4 1 4 (6 th Ci r. 1 9 8 9 ). W e h av e n o b as i s fo r fi n d i n g th e
reas on ab l e v al ue o f s erv i ces al l eg ed l y p erfo rm edb y

p et i t i o n er’ s s o n an dh i s g ran d s o n o r t o d i s t i n g u is h co m p en s at i o n fo r s erv i ces fro m p ers o n al o r fam i l y
ex p en s es . Reg ard i n g vari o u s trav el ex p en s es i ncl u d edas b u s i nes s ex p en s es , p et i t i o n er d i dn o t ex p l ai n ad equ at el y an y b u s i nes s n eedt o b e i n Ecu ad o r, Las Veg as , Can ad a, Vi rg i n i a, M ai n e, o r Fl o ri d a. He t es ti fi ed th ath e was p art i ci p at i ng i n d i s cu s s i o n s an d s h ari n g i n fo rm at i o n wi th “ affi l i at es ” atv ari o u s co n feren ces , b u t th e g en eral cl ai m s are u np ers u as i v e i n th e ab s en ce o f d et ai l s o r co rro b o rat i o n . He fai l edt o s at i s fy

an y o f t h e h ei g h t en eds ub s t an t i at i o n req ui rem en t s o f s ect i o n 2 7 4 (d ) wi th res p ectt o v eh i cl e ex p en s es , trav el ex p en s es , an d m eal s an d
en t ert ai n m en t . As t o ex p en s es t o wh i ch s ect i o n 2 7 4(d ) d o es n otap p l y , wh ere a t ax p ay er
es t ab l i s h es th ath e i n cu rred a d edu ct i b l e ex p en s e b u t i s u n ab l e t o s ub s tan t iat e t h e p reci s e am ou n t , we m ay , b eari n g h eav i ly ag ai n s tth e t ax p ay er wh o h as fai l edt o
m ai n t ai n reco rd s, ap p ro x i m at e t h e am o u n to f t h e ex p en s e. See Co h an v .- 1 1 -

[* 1 1 ] Co m

m i s si o n er, 3 9 F.2 d5 4 0 , 5 4 3 -5 4 4 (2 d Ci r. 1 9 3 0 ). Ho w ev er, we m u s t h av e s uffi ci en tev i d en ce up on wh ich t o m ak e a reas o n ab le es ti m at e t o ap p l y th e Co h an ru l e. See Sp ark m an v . Co m m i s s i o ner, 5 0 9 F.3 dat1 1 6 0 ; Van i cek v . Co m m i s s i o n er, 8 5 T.C. 7 31 , 7 4 2 -7 4 3 (1 9 8 5 ). W e d o n o th av e ad equ at e ev i d en ce i n thes e cas es to m ak e a reas o n ab l e ap p ro xi m at io n as t o m o s to f p et i t i o n er’ s d i s p u t edd edu ct i o n s, wh i ch i n cl u d e l arg e am o u n t s fo r co n tract l ab o r, o ffi ce
ex p en s es (i n cl u d i ng a h o m e o ffi ce), an dl eg al an dp ro fes s i o n al ex pen s es . Pet i t io n er d i dn o tt es ti fy ab o uto r o therwi s e ex p l ai n th e reas o n fo r t h e l eg al an d p ro fes s i on al ex p en s es th ath e d edu ct ed , an dth ere i s n o ev i d en ce o n wh ich we
co u ldb as e a fi n d i ng o r co n cl u si o n as t o wh et h er t h ey rel at ed t o h i s b u s i n es s o r were p ers o n al i n n atu re an dn o td edu ct i b l e. See g en eral l y Un i t edSt at es v . Gi l m o re, 3 7 2 U.S. 3 9 (1 9 6 3). Al th o u g h p o rt i o n s o f t h e am o u n t s rep ort edwere al l o wed fo r 2 0 1 3, thatfactd o es n o tei th er s up p o rta g reat er al l owan ce fo r t h aty ear
o r p ro v i d e s up p ortfo r t h e am o u n t s cl ai m edfo r 2 0 1 4. Fai lu re t o rai s e an i s s u e fo r
o n e t ax y ear d o es n o t p recl u d e o r affect th e co rrectd et erm i n at i o n o f t h ati s s u e fo r
an o th er y ear. See, e.g ., To l l efs en v . Co m m i s s io n er, 5 2 T.C. 6 7 1, 6 8 1 (1 9 6 9), aff’ d , 4 3 1 F.2 d5 1 1 (2 dCi r. 1 9 7 0 ). Pet i t i o ner p res en t edch eckb o o k l ed g er en tri es t o s up p o rtd edu ct i o n s fo r i n s u ran ce. Th o se reco rd s d o n o td i s cl o s e wh et h er the i n s u ran ce was p ers o n al o r- 1 2 -

[* 1 2 ] b u s i n es s rel at ed . If th e p aym en ts were fo r au t o i n s uran ce, t h en t o th e ex t en t th atp et i t i o n er cl ai m edd edu ct i on s b as edo n s tan d ardm i l eag e am o u nt s h e i s n o t
en t i t l edt o ad d act ual ex p en s es . See Nas h v . Co m m i s si o n er, 6 0 T.C. 5 03 , 5 2 0 (1 9 7 3); Kav um a v . Co m

m i s s i on er, T.C. M em o . 2 0 1 6 -1 01 , at* 1 8 -* 1 9; s ec. 1 .2 7 4
- 5 (j)(2 ), In co m e Tax Reg s . He p res en t edn o ev i d en ce o f b u s i n es s u s e o f th e
v eh icl es as a p ercen t ag e o f t o t al u s e, s o we h av e n o way o f al l o cat i n g v eh icl e
ex p en s es ev en i f an y

o f t h em h adb een ad equat el y

s ub s tan t i at ed
. Pet i t i o ner t es t i fi edab o u tad v ert i s i n g ex p en s es i n cu rredi n at t em p t i n g t o
es t ab l i s h an i nt ern etp res en ce fo r h i s m ark et in g b u s i n es s . He p res en t ed
co rro b o rat in g b an k ch arg es fo r Feb ru ary an dM arch 2 0 1 3 . He p res en t edcred i t cards t at em en t s fo r s i m i l ar i t em s fo r 2 0 1 4 . Onth e b as i s o f p et it i o n er’ s t es ti m o n y
an d th e co rro b o rat i n g d o cu m en t s , we co n cl u d e t h atp et i t i o n er i s en t it l edt o d edu ct $ 1 0 ,0 0 0 fo r 2 0 1 3 an d$ 1 0 ,0 0 0 fo r 2 01 4 fo r ad v ert i si n g ex p en s es . Oth erwi s e, p et i t i o n er h as fai l edt o s at i s fy h i s b u rd en o f p ro o f wi th res pect t o th e d i s al l o wed Sch edu l e C d edu ct i o n s. Ren tal Act i v i ty

Lo s s es Res p o n d en targ u es i n h i s p retri al m em o ran du m an d i n h i s o p en i ng b ri ef t hat p et i t i o n er i s n o ten t i t l edt o d edu ctth e ren t al l o s s es fo r 2 0 1 4 t o th e ex t en t th ey
ex ceed $ 25 ,0 0 0 b ecau s e o f t h e p as s i v e act i v i ty l i m i t at i o n s o f s ect io n 4 69 . See s ec.- 1 3 -

[* 1 3 ] 4 6 9 (i ). No th in g i n t h e reco rd , h o wev er, s u gg es t s t h atthe l os s d edu ct i o n s cl ai m edex ceed ed$ 2 5,0 0 0, o r th atan y o v eral l l i m i t at i o n was th e reas o n fo r d i s al lo wan ce. W e s ee n o reas o n , th erefo re, t o d i s cu s s fu rt h er t h e co m p l ex p ro v is i o n s o f s ect i o n 4 6 9 . W e i n t erp retres po n d en t ’ s arg u m en t s as a co n ces s i o n as t o an y s ub s t an t i at edex p en s es t o t al i n g l es s t h an$ 2 5 ,0 0 0 . Inh i s rep l y b ri ef
res p o n d en t arg u es thatp et i t i o ner fai ledt o s ubs t an ti at e h i s ren t al l o s s es an ds eek s t o i m p o s e ad d i t i o n al o b li g at i o ns o n p et i ti o n er n o t ad dres s edi n res p o n d en t ’ s p ret ri al m em o ran du m , attri al , o r o n o pen in g b ri ef. W e d i s reg ardth o s e b el at ed
co n ten t i o n s . Pet i t i o ner t es t i fi edth ath e s u s tai n edl o ss es fro m ren t al act i vi t i es i n 2 0 1 4
s i m i l ar t o th o s e t h ath e rep o rt edfo r 2 0 1 3. Th e Sch edu le E fo r 2 01 4 , h o wev er, was
n o tfo u n di n th e s t i p u l at edex h i b i t s , a g ap at tri b u t ab le eq ual l y t o each p art y . Pet i t io n er’ s t es t i m o n y an dth e m i n i m al ch eckreco rd s were s u ffi ci en tt o es t ab l i s h th ath e m ad e m

u l t i p l e t ri p s t o p erfo rm

reg u l ar rep ai rs an dm ai n ten an ce o n th e p ro p ert i es an dthath e p ai d p ro p ert y t ax es o n th em . Th e ex pen s es i n cu rredfo r tri p s were n o ts ub s t an t i at edi n acco rd an ce wi th s ect i o n 2 7 4 (d ). Al th o ug h i t ap p ears th at p et i t i o ner p u rch as edt o o l s , i ti s u n cl ear wh et h er t h e t o o l s were fo r h i s
co n st ru ct i o n act i v i ty an dd edu ct edo n Sch edu le C o r fo r rep ai rs o f h i s ren t al p ro p erty an dd edu ct edo n Sch edu l e E, o r p erh ap s o n b o th . Us i n g o u r b es t- 1 4 -

[* 1 4 ] ju d g m en tb as edo n p et i t io n er’ s t es t im o n y an dth e real es t at e t ax b i l l s an d
o th er co rro b orat i n g ev i d en ce, an db eari n g h eav i l y ag ai n st p et it i on er b ecau s e h e fai l edt o m ai n t ai n ad equ at e reco rd s, we co n cl u d e t h at h e i s en t i t l edt o d eductren t al act i vi ty l os s es o f $ 5 ,0 0 0 fo r 2 0 1 4
. Ch ari t ab l e Co n tri b u t io n s Fo r cas h co n tri b u t i on s a t ax p ay er m u s tret ai n can cel edch eck s , recei p t s fro m th e d o nee o rg an izat i o n s s h owi ng th e d at es an d am o u nt s o f t he co n tri b ut i o n s , o r
o th er rel iab l e wri tt en reco rd s s h o wi n g t h e n am es o f t h e d o n ees , d at es , an d am o u nt s
o f t h e co n tri b u t i o n s. See s ec. 1 .1 7 0 A -1 3(a)(1 ), In co m e Tax Reg s . Un d er s ect i o n 1
. 1 7 0 A-1 3 (b )(1 ), In co m e Tax Reg s ., a t ax p ay er m u s t
m ai n t ai n fo r each n on cas h co n tri b u t i o n a recei p t fro m th e d o n ee o rg an izat i o n
u n l es s d o i n g s o i s i m

p ract i cal . Th e d o n ee recei p tm u s t s h o w: (1 ) t he n am e o f t h e d o n ee o rg an izat i o n, (2 ) t h e d at e an dl o cat i o n o f t he co n tri b ut io n , an d(3 ) a d es cri p t io n o f t h e p ro p ert y i n d et ai l reas on ab l y

s u ffi ci en tu n d er th e ci rcu m s t an ces . Id
. A t ax p ay er wh o l ack s a d o n ee recei pti s req u i redt o k eep rel i ab l e wri t t en
reco rd s i n cl u d i n g , am o n g o th er t h i n gs : (1 ) t h e n am e an dad dres s o f t h e d o n ee
o rg an i zat i o n t o wh ich th e co nt ri b u t i o n was m ad e, (2 ) th e d at e an d l o cat i on o f t h e
co n tri b u t i o n , (3 ) a d es cri p t i o n o f t h e p ro p ert y i n d et ai l reas o n ab l e u n d er t h e- 1 5 -

[* 1 5 ] ci rcu m st an ces (i n cl u di ng th e v al u e o f t h e p ro pert y ), an d(4 ) th e fai r m ark et
v al u e o f t h e p ro p ert y

atth e t i m e t h e co n tri b u t i o n was m ad e an dth e m et h o du s edt o d et erm i n e t h e fai r m ark etv al u e. Id
. s ub para. (2 )(i i ); s ee al s o Van Du s en v . Co m m i s s i o n er, 1 3 6 T.C. 5 1 5 , 5 3 2 (2 0 1 1). Fu rt h er, n o d edu ct io n i s al l o wedfo r

“ an y co n tri b u ti o n o f cl ot h i n g o r a h o u s eh ol d i t em ” u n l es s s u ch p ro p ert y i s “ i n g o o du s edco n d it i o n o r b et t er.” Sec. 1 70 (f)(1 6 )(A). Pet i t i o ner fai l edt o p res en tev i den ce t hats at i s fi edth e req u i rem en t s o f l aw fo r d edu ct i o n s o f ch ari t ab l e co n tri b u t i o n s . He cl ai m edth at each d o n at i o n was l es s th an $ 25 0 an d as s ert edh i s u n d ers t an d i n g t h ath e d i d n o tn eedrecei p t s fo r th o s e. Hi s u nd ers t an d i n g i s co n traryt o th e ru l es ci t edab o v e. Hi s g en eral t es ti m o n y as t o wh atg o o d s were d o n at edan dth e g en eral i zedl i s t i n g o n Sch edu l e A o f h i s 2 0 1 4 retu rn are n o ts up po rt edb y an y wri t t en reco rdan dare i m p ro b ab l e an di m

p l au s i b l e
as t o th e am o u n ts an dv al u es cl ai m ed . He i s n o ten t it l edt o an y d edu ct i o n s fo r ch ari t ab le co n tri b u t i on s . Sect i o n 6 6 6 2(a) Accu racy -Rel at edPen al t i es Sect io n 6 6 6 2 (a) an d(b )(1 ) an d(2 ) i m p o s es a 2 0 % accu racy -rel at ed p en al t y
o n an y u n d erp aym en to f Fed eral i n co m e t ax wh i ch i s at tri b u tab l e t o n eg li g en ce o r d i s reg ardo f ru l es o r reg u l at i on s o r a s ub st an t i al u n ders t at em en to f i nco m e t ax . Neg li g en ce i n cl u d es fai l u re t o k eep ad equ at e b o o k s an dreco rd s o r t o s ub st an t i at e- 1 6 -

[* 1 6 ] i t em s p ro p erl y . Sec. 1 .6 6 6 2 -3 (b )(1 ), In co m e Tax Reg s . Anu n d ers t at em en t
o f i n co m e t ax i s s ub s t an t i al i f i tex ceed s th e g reat er o f 1 0 % o f t h e t ax req u iredt o b e s h own o n th e retu rn o r $ 5 , 0 0 0 . Sec. 6 6 62 (d )(1 )(A). Sect io n 6 6 6 2 (c) d efi n es n eg l i g en ce as i n cl ud i n g an y fai l ure t o m ak e a
reas on ab l e at t em

p tt o co m p l y wi t h th e p ro vi s i o n s o f th e Co de an dd efi nes d i s reg ardas an y

carel es s , reck l es s , o r i n ten t io n al d is reg ard . See s ec. 1 .6 6 62
- 3 (b )(1 ) an d(2 ), In co m e Tax Reg s . Neg li g en ce i s th e l acko f du e care o r t h e fai l u re t o d o wh at a reas o n ab l e an dp ru d en tp ers o n wo u l dd o u n d er th e ci rcu m s t an ces . Neel y v . Co m m is s i o n er, 8 5 T.C. 9 34 , 9 4 7 (1 9 8 5). Di s reg ard o f ru l es o r reg u l at i o n s i s carel es s i f t he t ax p ay er d o es n o tex erci se reas o nab l e d i li g en ce t o d et erm i n e t h e co rrect n es s o f a ret u rn p os i t i o n t h ati s co n traryt o the ru l e o r reg u l at i o n . Sec. 1 .6 6 6 2 -3 (b )(2 ), In co m e Tax Reg s . Un d er s ect i o n 7 49 1 (c), t h e Co m m i s s i on er b ears the b u rd en o f p ro duct i o n wi th reg ardt o p en al t ies an dm u s tco m e fo rwardwi th s uffi ci en t ev i den ce i n d i cat i n g t h at i ti s ap p ro p ri at e t o i m po s e p en al ti es . See Hi g b ee v . Co m m i s s i o n er, 1 1 6 T.C. at4 46
. Pet i t i o ner fai l edt o m ai n t ai n reco rd s ad equ at el y s ub s t an t i at i n g th e ex p en s es
u n d erl y i n g h i s cl ai m edd edu ct i o n s . He rep ort edn o t ax l iab i li t ies o n h i s retu rn s . Th e u nd ers t at em en to f i n co m e t ax fo r each y ear as a res u l t o f o ur h o l d i n g s i s- 1 7 -

[* 1 7 ] s ub s t an t ial as d efi nedi n s ect i o n 6 6 6 2 (d )(1 )(A). Iti s ap p ro p ri at e t o i m p o s e a p en al ty fo r each y ear, s ub jectt o th e d i s cu s si o n b el o w. Res p o n d en t ’ s b u rd en al s o i n cl u d es a s h o wi n g u n der s ect io n 6 7 5 1 (b ) t h atth e p en al t i es d et erm i n edi n th e s tatu t o ry n o t i ces were p ro perl y

ap p ro v edb y

a
s up erv i s o r. Graev v . Co m m i ss i o n er (Graev III), 1 4 9 T.C. _

_ (Dec. 2 0 , 2 0 1 7 ),
s up p lem en t i n g an do v erru l i n g i n p artGraev v . Co m m i s s i on er (Graev II), 1 4 7 T.C. 4 6 0 (2 01 6 ). Tri al o f t h es e cas es was h el do n Sep t em b er 1 8 , 2 01 7 . Res p o n d en t ’ s
o p en in g b ri ef was fi l edNo vem b er 2 9 , 2 0 1 7 . As o f th att i m e, t hi s Co urth adh el d i n Graev II t h atth e qu es t i o n o f wh et h er a p en al ty was p ro p erl y

ap p ro v edu n d er
s ect i on 6 7 5 1 (b ) was p rem atu re i n a d efi ci en cy cas e, b ecau s e t h e p en al ty was n o t y et as s es sed
. In Graev III we o v erru l edan ds up p lem en t edGraev II, an dwe accep t edth e h o l d i n g o f t h e Co u rto f Ap peal s fo r t h e Seco n dCi rcu i ti n Ch ai v . Co m m i s s i o n er, 8 5 1 F.3 d1 9 0, 2 2 1 (2 dCi r. 2 0 1 7 ), aff’ g i n p art , rev ’ g i n p artT.C. M em o . 2 0 1 5 -4 2 , th ats ect i o n 6 7 5 1(b ) “ req u i res wri t ten ap p ro v al o f t he i n i t i al p en al ty d et erm i n at i o n
n o l at er t h an th e d at e t h e IRS i s s u es th e n ot i ce o f d efi ci en cy (o r fi l es an an swer o r
am en d edan s w er) as s ert in g s u ch p en al ty .”- 1 8 -

[* 1 8 ] Pet i t i o ner’ s b ri ef was fi l edFeb ru ary 1 2, 2 0 1 8 . Al tho u gh h e ch al l en g edth e ap p li cab i l i ty

o f th e s ect i on 6 66 2 (a) p en al ty , h e d i dn o tm en t i o n s ect i o n 6 7 5 1 (b ), wh i ch i s n o ts u rp ri s i n g i n v i ew o f t he l on g p eri odi n wh i ch l awy ers an d t h e Co u rt h ad n o tad dres s edth ats ect i o n. OnFeb ru ary 1 3, 2 0 18 , th e Co u rto rd ered
res p o n d en t t o fi le a rep l y b ri ef ad dres s i n g th e effect o f s ect i o n 6 75 1 (b ) i n t h es e
cas es an dt o fi le an y

ap p ro p ri at e m o ti o n b y

th e s am e d at e. OnM arch 1 6 , 2 0 1 8 , res po n d en tfi l eda m ot io n t o reo pen th e reco rds o th at
res p o n d en t co ul ds ub m itev i d en ce o f s up erv i so ry ap p ro v al fo r t h e d et erm i n ed p en al t i es . Th e m o ti o n was acco m p an i edb y a d ecl arat i o n o f t h e ex am i n er wh o
co n du ct ed th e ex am i nat i o n o f p et i t i o n er’ s 2 0 13 an d2 0 1 4 retu rn s . A Pen al ty Ap p ro v al Fo rm

fo r each y ear was at t ach edt o th e d ecl arat i o n . Pet i t i o n er o b ject ed t o res p o n d en t ’ s m ot i o n an dreq u es tedth e ri g h tt o ex am in e t h e d ecl aran t
co n cern in g co m

p l i an ce wi th s ect i o n 6 7 5 1 (b ). Pet i t i o n er was p erm i tt ed “ t o s erv e
o n res p o n d en t i n t erro g at o ri es co n s i s t en t wi th Ru l e 7 1 , Tax Co u rtRu l es o f Pract i ce
an d Pro cedu re, wh i ch wi l l b e s i n g l e, d efi n i t e qu es t i o n s (s ee Pl ei er v . Co m m i s s i o n er, 9 2 T.C. 4 99 (1 9 8 9 ))” d i rect edt o t h e co n t en t s o f t h e d ecl arat i o n
s up p ort i n g res po n d en t ’ s m o t i o n t o reo p en th e reco rd . Di s reg ard i n g o u r o rd er, p et i t i o n er s ub m it t edu nt i m el y req u es t s fo r ad m i s s i o n s co n cern i ng m at t ers o th er th an th e ex i s t en ce o f s up erv i so ry ap p ro v al . Pet i t i o n er al s o s ub m i tt ed- 1 9 -

[* 1 9 ] i n t erro g at o ri es th at p u rp o rt edt o req u i re res po n d en tt o p rep are a n arrat i v e o f
res p o n d en t’ s p o s i t i o n an dth e an al y s i s o f i ss u es th atwas al read y co n tai n edi n
res p o n d en t’ s p ret ri al m em o ran d a an di n res p o nd en t ’ s o p en i n g an drep l y b ri efs
. Pet i t i o ner ch al len g es the p ro ces s o f ex am i nat i o n an do th er m at t ers o ccu rri n g b efo re t h e s t atu t ory

n o t i ces were s en t. Ex cep twi th reg ardt o s up erv i s o ry ap p ro v al
o f p en al t i es as s p eci fi edi n s ect i o n 6 7 5 1 (b ), we h av e co n s i s t en t l y h el dthats u ch i n qu i ri es are i n ap p ro p ri at e. Green b erg ’ s Ex p res s , In c. v . Co m m i s s i o n er, 6 2 T.C. 3 2 4 , 3 2 7 -3 2 8 (1 9 74 ) (ex p l ai ni ng th ata t ri al b efo re t h e Co u rt i s a p ro ceed i n g d e
n o v o , an do u r red et erm i n at io n s o f a t ax p ay er’ s t ax l i ab i l i t i es are b as edo n t h e
m eri t s an dn o t o n m at t ers o ccu rri n g b efo re t h e n o t i ces o f d efi ci en cy were s en t );
s ee, e.g ., Wh it ti n g t o n v . Co m m i s s i o n er, T.C. M em o . 2 0 1 5 -1 5 2 , aff’ d, 6 9 8 F. Ap p ’ x 5 1 5 (9 th Ci r. 2 0 1 7 ). Pet i t i o n er’ s i n t erro g at o ri es were n o tco n s i s t en twi t h th e Co u rt ’ s o rd er o r wi th Pl ei er. Pet i t i on er t h u s s qu an d eredth e o pp o rtun i ty p ro v id edt o h i m

an dfai ledt o p res en ta v al i do b ject i o n t o res p o nd en t ’ s m ot i o n . Ex erci s in g o u r d i s cret io n t o fav o r a d et erm i n at i o n o f t h e p en al ti es o n t h e
m eri t s o f t h es e cas es , we g ran t ed res p on d en t ’ s m o t i on an dh av e i n cl u d edi n o u r fi nd i ng s th atth e req u i reds up erv i s o ry ap pro v al was o bt ai n ed
. On ce t h e Co m

m i s s io n er h as m etth e b u rd eno f p ro du ct i o n , th e t ax pay er
m u stco m e fo rward wi th p ers u as i v e ev i d en ce t hatth e p en al ty i s i n ap p ro p ri at e- 2 0 -

[* 2 0 ] b ecau s e, fo r ex am

p l e, h e o r s h e act edwi th reas on ab l e cau s e an di n g o o d fai th
. Sec. 6 6 6 4 (c)(1 ); Hi g bee v . Co m m i ss i o n er, 1 1 6 T.C. at4 4 8 -4 4 9 . Th e d eci s i o n as t o wh et h er a t ax p ay er act edwi th reas o n ab l e cau s e an di n g oo dfai th i s
m ad e o n a cas e-b y -cas e b as i s , t ak i n g i n t o acco u n tal l o f t h e p ert in en tfact s an d ci rcu m s t an ces . See s ec. 1 .6 6 6 4 -4 (b )(1 ), In co m e Tax Reg s . Th e m o s ti m p o rt an t fact or i n d et erm i n in g reas o n ab l e cau s e an dg o o d fai th i s the ex t en to f t h e t ax p ay er’ s effo rtt o as s es s h i s o r h er p ro p er i n co m e t ax l i ab i l it y . Id
. Pet i t i o ner d i dn o tco n s u l ta t ax p ro fes s i o n al wh en h e ad d ed up am o un t s
s h o wno n h i s cred i tcards t at em en t s an dd edu ct edan y i t em th ati n d i cat edtrav el wi th o u tco m

p l y i n g wi th s ect io n 2 7 4 (d ), d edu ct edp aym en t s t o h i s s on an dh i s g ran d s o n wi th o u t d et erm i n i n g reas o n ab l e co m p en s at i o n o r d o cu m en t i n g th e b u s i n es s p u rp o s e o f p aym en t s th atap p ear p ers o n al , d edu ct edch ari tab l e
co n tri b u t i o n s wi tho u tco m p l y in g wi th s ect i o n 1 7 0, an des t i m at edd edu ct i o ns b y
reco n s tru ct i o n rat h er t han rel i ab l e reco rd s . He d i dn o tex erci s e reas o n ab l e d i l i g en ce an dh as n o t s h o wnreas o n ab l e cau s e. Pet it i on er i s l i ab l e fo r t h e s ect i o n 6 6 6 2 (a) p en al t ies
. Sect i o n 6 6 5 1(a) Ad d i t i o n t o Tax Sect io n 6 6 5 1 (a)(1 ) i m

p o s es an ad d i t io n t o t ax fo r l at e fi l i n g o f a ret u rn . Th e ad d it i o n t o t ax d et erm in edfo r 2 0 1 4 u nd er s ect io n 6 65 1 (a) ap p l ies ab s en ta- 2 1 -

[* 2 1 ] s h o wi ng b y p et i ti o n er o f reas o n ab l e cau s e an da l ack o f wi l l fu l n eg l ect . See Hi g bee v . Co m

m i ss i o n er, 1 1 6 T.C. at4 4 6 -4 4 7
. Pet i t i o ner’ s 2 0 1 4 retu rn was recei v ed b y th e IRS o n Ap ri l 2 7 , 2 0 1 5
. Pet i t io n er d o es n o tas s ertth atth e ret u rn was t i m el y m ai l ed , an dh e d i dn o tt es t i fy t o the ci rcu m s tan ces an dt i m i n g o f p rep arat i o n o f t h atretu rn . He ackn o wl ed g es i n h i s b ri ef th atthe ret u rn was du e Ap ri l 1 5, 2 0 15 , an dwas fi l edAp ri l 2 7, 2 0 1 5 , an d h e d o es n o t co nt en dth ath e ap p l i edfo r an ex ten s i o n. He m erel y arg u es th at“ h e
ex erci s es o rd i n ary

b u s i n es s care an dp ru d en ce t h atren d ers h im u n ab l e t o fi l e a t i m el y retu rn ” an dth ath e es t ab l i s h es reas o n ab le cau s e b ecau s e t he ret u rn s h o wed
n o t ax du e. Pet it i on er i s wro n g . Pet i ti o ner fai l edt o s h o w reas on ab l e cau s e
ex cu si n g th e l at e fi l i n g . Th e ad d i t i on t o t ax wi l l b e s u s t ai ned
. W e h av e co n s id eredth e arg u m en t s o f t he p art ies , i n cl u d i n g p et i t i o n er’ s
m i s g u i d eddue p ro ces s arg u m en t s , th atare n o td i s cu s s ed i n thi s o p i ni o n . Th o s e arg u m en t s are i rrel ev an t o r l ackm eri tu n der t h e fact s i n th es e cas es . To refl ectth e d educt i o n s th atwe h av e al l o w ed , Deci s i o n s wi l l b e en t ered
u n der Ru l e 1 5 5
.