Opinion ID: 746472
Heading Depth: 3
Heading Rank: 3

Heading: Additions to Irene's tax

Text: 7 The Commissioner determined that Irene was liable for an addition to tax under I.R.C. § 6651(a) for failing to file a timely return in 1988. The Tax Court held that Irene did not show her failure was due to reasonable cause and that she therefore was liable for the addition. The court found further that Irene was liable for an addition to tax under § 6661(a) for a substantial understatement of tax for taxable year 1988. Irene was also found liable for accuracy-related penalties under § 6662 for substantial understatements of tax in 1989 and 1990. Section 6664(c) states that these penalties shall not be imposed if the taxpayer had a reasonable cause for the understatement and acted in good faith. Irene claimed reasonable cause insofar as she relied on the state court order. The Tax Court held that her reliance was unreasonable because the order did not rule on whether the payments were taxable to Irene. Moreover, in the Tax Court's view, Irene did not present sufficient evidence to support her claim that she filed her returns based on the advice of a competent tax professional. Accordingly, the court held that Irene was liable for the addition to tax under § 6661 for 1988 and the penalties under § 6662 for 1989 and 1990. Conversely, because the court had determined it proper for Edward to have deducted the payments he made to Irene, it ruled that Edward was liable for no penalties insofar as he had accurately reported his income for the years in question. II