Court Opinion

ID: 4374054
Source: CourtListenerOpinion
Date Created: 2019-03-06 05:01:27.808565+00
Date Added: 2024-06-11T14:49:06.313699
License: Public Domain

T.C. Summary Opinion 2019-4

                            UNITED STATES TAX COURT

          JESUS RODRIGUEZ AND JUANITA RODRIGUEZ, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent

      Docket No. 1690-15S.                             Filed March 5, 2019.

      Jesus Rodriguez, pro se.

      Susan Kathy Greene and Yvette Nunez, for respondent.

                                 SUMMARY OPINION

      CARLUZZO, Chief Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in effect when the

petition was filed.1 Pursuant to section 7463(b), the decision to be entered is not

      1
          Unless otherwise indicated, section references are to the Internal Revenue
                                                                          (continued...)
                                          -2-

reviewable by any other court, and this opinion shall not be treated as precedent

for any other case.

      In a notice of deficiency (notice) dated October 15, 2014, respondent

determined a $6,953 deficiency in petitioners’ 2010 Federal income tax and

imposed a $604 section 6651(a)(1) addition to tax and a $1,391 section 6662(a)

accuracy-related penalty. The issues for decision are whether petitioners: (1) are

entitled to unreimbursed employee business expense deductions claimed on

Schedule A, Itemized Deductions; (2) are entitled to deductions claimed on

Schedules C, Profit or Loss From Business; (3) are entitled to deduct educator

expenses related to Mrs. Rodriguez’s employment; (4) realized and must recognize

cancellation of indebtedness (COI) income; (5) are entitled to a moving expense

deduction; (6) are entitled to an additional child tax credit; (7) are liable for a

section 6651(a)(1) addition to tax; and (8) are liable for a section 6662(a)

accuracy-related penalty.2

      1
        (...continued)
Code (Code) of 1986, as amended, in effect for the year in issue. Rule references
are to the Tax Court Rules of Practice and Procedure. All monetary amounts have
been rounded to the nearest dollar.
      2
        In the petition, petitioners claim entitlement to a deduction for attorney’s
fees not claimed on their 2010 Federal income tax return. According to
petitioners, the deduction relates to a personal bankruptcy filed and dismissed in
                                                                         (continued...)
                                           -3-

                                     Background

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

petition was filed, and at all times relevant, petitioners lived in Texas with their

daughter, who was older than 17 as of the close of 2010.

      Mr. Rodriguez (petitioner) holds a master’s degree in education,

psychology, and counseling. At all times relevant here he was employed as an

educational diagnostician in the Dallas Independent School District (DISD). As

an educational diagnostician, petitioner worked with children with special needs in

the various schools within the DISD. He also consulted with teachers and school

staff that interacted with his students.

      As part of his employment with the DISD, petitioner routinely traveled to

various schools within the DISD during the workday and occasionally traveled to

the DISD headquarters. He also traveled to meetings and conferences outside of

the DISD. Petitioner used his personal automobile in connection with

employment-related travel.

      During 2010 the DISD’s compensation and benefits expense reimbursement

policy (reimbursement policy) entitled petitioner to reimbursement for employee

      2
        (...continued)
2004 or 2005. They did not present any evidence to establish that they are entitled
to the deduction, and their claim is rejected without further comment.
                                        -4-

business-related expenses, including travel expenses. Under the reimbursement

policy petitioner was also entitled to a per diem travel allowance for lodging and

meals if certain conditions were met. During 2006, 2007, and 2008 petitioner

applied for and received reimbursements from the DISD for employee-related

expenses; petitioner did not apply for reimbursements for employee-related travel

or other expenses during 2010.

      According to two Schedules C included with petitioners’ 2010 Federal

income tax return (return), one or both petitioners were involved in what they

claim to be sole proprietor type businesses. Through one, petitioners claim to

have provided consultant, research, and educational services (consultant business),

including “private tutorials to school aged children * * * [and] special education

and life skills instruction to * * * [petitioners’] severely handicapped daughter”.

Through the other one, identified on a Schedule C as “J and J’s Delivery Services”

(delivery business), petitioners claim to have provided delivery services that

included “transporting people to appointments” and transporting their “disabled

daughter to her doctor’s appointments”. Petitioners claim to have dealt mostly in

cash with respect to the consultant and delivery businesses; they kept no financial

or business records of expenses, clients, or otherwise. As best we can tell, the
                                         -5-

consultant and delivery businesses operated largely to provide services to

petitioners’ daughter.

      At trial petitioners presented a mileage log for travel related to petitioner’s

employment with the DISD as well as two mileage logs for travel related to the

delivery business. None of the mileage logs were prepared contemporaneously

with the events recorded; the logs were created in anticipation of trial.

      During certain years before the year in issue Mrs. Rodriguez maintained a

credit card with Citibank (South Dakota), N.A. (Citibank). Citibank’s records

reflect that Mrs. Rodriguez had an account balance of $3,615 as of December 7,

2004, and that the last payment Citibank received was on October 15, 2004, for

$81.66. From 2005 through 2008 Citibank pursued collection on Mrs.

Rodriguez’s account and on September 12, 2008, the account was placed in

“pending sale” status. On the basis of Citibank’s identification criteria, the

account was not eligible for issuance of a Form 1099-C, Cancellation of Debt, in

2008 or 2009. Ultimately, on September 12, 2010, Citibank in accordance with its

internal policies issued to Mrs. Rodriguez a Form 1099-C, reporting that it had

discharged the $3,561 debt she then owed.
                                        -6-

       On March 23, 2005, Mrs. Rodriguez initiated a bankruptcy proceeding that

was dismissed on June 22, 2005. The bankruptcy court did not grant Mrs.

Rodriguez a discharge.

       Petitioners’ return was filed on April 6, 2014. On the return they reported

wage income of $65,399, taxable interest of $1,233, losses on Schedules C of

$9,874, a rental real estate loss on Schedule E, Supplemental Income and Loss, of

$16,998, total income of $39,760, and “above-the-line” deductions of $500 for

educator expenses and $1,456 for moving expenses, resulting in adjusted gross

income of $37,804. The return shows no taxable income and reports no income

tax liability.

       Petitioners’ return includes a Schedule A on which they claimed various

deductions including, as relevant here, a $5,983 (before the application of the 2%

limitation prescribed in section 67(a)) miscellaneous expense deduction for

unreimbursed employee business expenses. A Form 2106-EZ, Unreimbursed

Employee Business Expenses, included with petitioners’ return shows the detail of

the deduction for unreimbursed employee business expenses as follows:

(1) vehicle expenses of $4,114,3 (2) parking fees and tolls of $106, (3) travel

       3
       In claiming vehicle expenses of $4,114, petitioners elected to use the
applicable standard mileage rate. The Commissioner generally updates the
                                                                       (continued...)
                                        -7-

expenses while away from home of $512, (4) other business expenses of $986, and

(5) meals and entertainment expenses of $265 (after the application of the 50%

limitation prescribed by section 274(n)).

      The Schedules C for the consultant and delivery businesses show the

following income and deductions:

                               Consultant business       Delivery business

Income:
  Gross receipts                       $8,001                   $5,053

Expenses:
  Advertising                             899                      827
  Car and truck                         3,442                      834
  Contract labor                          238                     -0-
  Depreciation                            641                    1,652
  Legal and professional
    services                                140                     60
  Office                                    684                    299
  Rent or lease of vehicles,
    machinery, and equipment                354                    275
  Rent or lease of other business
    property                                372                   -0-
  Repairs and maintenance                   390                    289
  Supplies                                  358                    251
  Taxes and licenses                        275                     85
  Travel                                    695                    250

      3
       (...continued)
optional standard mileage rates annually. See sec. 1.274-5(j)(2), Income Tax
Regs. The standard mileage rate of 50 cents per mile for 2010 is set forth in Rev.
Proc. 2009-54, sec. 2.01, 2009-51 I.R.B. 930, 930.
                                        -8-

  Meals and entertainment                 321                        70
  Utilities                               198                        81
  Other1                                4,985                     2,963
    Total                              14,992                     7,936

     Net profit (loss)                  (6,991)                  ( 2,883)
      1
       The deduction for “other expenses” for the consultant business is for “Bad
Business Debt” of $4,005 and “Workshops, Conferences, and Related Expenses”
of $980. The deduction for “other expenses” for the delivery business is for “Bad
Business Debt” of $2,963.

      Petitioners also claimed an additional child tax credit of $1,000 on their

return.

      In the notice respondent: (1) increased petitioners’ income by the amount

reported as COI on Form 1099-C, (2) disallowed the moving expense deduction,

(3) disallowed the deductions claimed on Schedules C, (4) disallowed $250 of the

$500 deduction claimed for educator expenses, (5) disallowed the miscellaneous

expense deduction for unreimbursed employee business expenses claimed on

Schedule A, and (6) disallowed the additional child tax credit. Respondent further

determined that petitioners were liable for the addition to tax under section

6651(a)(1) and for the accuracy-related penalty under section 6662(a) on various

grounds. Other adjustments made in the notice are computational and need not be

addressed.
                                        -9-

                                    Discussion

      Generally, the Commissioner’s determinations are presumed correct, and the

taxpayer bears the burden of proving that those determinations are erroneous.

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).4 As we have

observed in countless opinions, deductions and credits are a matter of legislative

grace, and the taxpayer bears the burden of proof to establish entitlement to any

claimed deduction or credit. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84

(1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

      A taxpayer claiming a deduction on a Federal income tax return must

demonstrate that the deduction is provided by statute and must further substantiate

that the expense to which the deduction relates has been paid or incurred. Sec.

6001; Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), aff’d per curiam, 540
F.2d 821 (5th Cir. 1976); Meneguzzo v. Commissioner, 43 T.C. 824, 831-832

(1965); sec. 1.6001-1(a), Income Tax Regs.

      Taxpayers may deduct ordinary and necessary expenses paid in connection

with operating a trade or business. Sec. 162(a); Boyd v. Commissioner, 122 T.C.
305, 313 (2004). Generally, the performance of services as an employee

      4
       Petitioners do not claim and the record does not otherwise demonstrate that
the provisions of sec. 7491(a) are applicable here, and we proceed as though they
are not.
                                       - 10 -

constitutes a trade or business. Primuth v. Commissioner, 54 T.C. 374, 377

(1970). To be ordinary the expense must be of a common or frequent occurrence

in the type of business involved. Deputy v. du Pont, 308 U.S. 488, 495 (1940).

To be necessary an expense must be appropriate and helpful to the taxpayer’s

business. Welch v. Helvering, 290 U.S. at 113. If, as a condition of employment,

an employee is required to incur certain expenses, then the employee is entitled to

a deduction for those expenses, unless the employee is entitled to reimbursement

from his or her employer. See Fountain v. Commissioner, 59 T.C. 696, 708

(1973); Spielbauer v. Commissioner, T.C. Memo. 1998-80. An employee business

expense is not “ordinary and necessary” if the employee is entitled to

reimbursement from his or her employer but fails to seek reimbursement. See

Podems v. Commissioner, 24 T.C. 21, 22-23 (1955); Noz v. Commissioner, T.C.

Memo. 2012-272, at *22. On the other hand, section 262(a) generally disallows a

deduction for personal, living, or family expenses.

      As a general rule, if a taxpayer provides sufficient evidence that the

taxpayer has paid a trade or business expense contemplated by section 162(a) but

is unable to adequately substantiate the amount, the Court may estimate the

amount and allow a deduction to that extent. Cohan v. Commissioner, 39 F.2d
540, 543-544 (2d Cir. 1930). However, in order for the Court to estimate the
                                        - 11 -

amount of an expense, there must be some basis upon which an estimate may be

made. Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985). Otherwise, any

allowance would amount to unguided largesse. Williams v. United States, 245
F.2d 559, 560 (5th Cir. 1957).

      Deductions for expenses attributable to travel (“including meals and lodging

while away from home”), entertainment, gifts, and the use of “listed property” (as

defined in section 280F(d)(4) and including passenger automobiles), if otherwise

allowable, are subject to strict rules of substantiation. Sec. 274(d); see Sanford v.

Commissioner, 50 T.C. 823, 827 (1968), aff’d per curiam, 412 F.2d 201 (2d Cir.

1969); sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov.

6, 1985). With respect to deductions for these types of expenses, section 274(d)

requires that the taxpayer substantiate either by adequate records or by sufficient

evidence corroborating the taxpayer’s own statement: (1) the amount of the

expense, (2) the time and place the expense was incurred, (3) the business purpose

of the expense, and (4) in the case of an entertainment or gift expense, the business

relationship to the taxpayer of each expense incurred. For “listed property”

expenses, the taxpayer must establish the amount of business use and the amount

of total use for such property. See sec. 1.274-5T(b)(6)(i)(B), Temporary Income

Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).
                                        - 12 -

      Substantiation by adequate records requires the taxpayer to maintain an

account book, a diary, a log, a statement of expense, trip sheets, or a similar record

prepared contemporaneously with the expenditure and documentary evidence

(e.g., receipts or bills) of certain expenditures. Sec. 1.274-5(c)(2)(iii), Income Tax

Regs.; sec. 1.274-5T(c)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46017

(Nov. 6, 1985). Substantiation by other sufficient evidence requires the

production of corroborative evidence in support of the taxpayer’s statement

specifically detailing the required elements. Sec. 1.274-5T(c)(3), Temporary

Income Tax Regs., 50 Fed. Reg. 46020 (Nov. 6, 1985).

      With these fundamental principles of Federal income taxation in mind, we

consider petitioners’ entitlement to the various deductions and the additional child

tax credit here in dispute.

I. Schedule C Business Expenses and Schedule A Unreimbursed Employee
   Business Expenses

      Petitioners claim expenses totaling $14,992 for their consultant business,

expenses totaling $7,936 for their delivery business, and $5,983 for unreimbursed

employee business expenses related to petitioner’s employment with the DISD.

According to respondent, petitioners have failed to establish that the expenses

were paid or, if paid, the expenses were business related.
                                        - 13 -

      In support of the above-referenced deductions petitioners submitted: (1) a

collection of handwritten and printed invoices and receipts, (2) a mileage log for

travel related to petitioner’s employment with the DISD as well as two mileage

logs for travel related to the delivery business, and (3) numerous other documents

of little, if any, relevance, many of which are duplicated many times over in the

record.

      Taking into account the documents submitted by petitioners and petitioner’s

testimony, we are not persuaded that they are entitled to any of the deductions here

in dispute. Most of the deductions were not substantiated by written evidence, and

the written evidence that was provided is hardly credible. Furthermore, petitioners

have not given us a basis upon which we can reasonably estimate the amount of

the expenses to which the deductions relate. See Cohan v. Commissioner, 39 F.2d

at 543-544; Vanicek v. Commissioner, 85 T.C. 742-743.

      Documents submitted to substantiate the deductions subject to section 274

are deficient in one respect or another. For example, none of the mileage logs

contain any specific entries regarding the business purposes of petitioner’s travel.

See Fleming v. Commissioner, T.C. Memo. 2010-60. Hotel receipts submitted by

petitioners relate to individuals other than petitioners. Petitioner’s explanation

that he used pseudonyms at the hotels was unpersuasive. Otherwise, it would
                                       - 14 -

seem that amounts paid for hotel expenses could easily be substantiated by

canceled checks, credit card statements, or bank statements. No such evidence has

been submitted.

      With respect to the unreimbursed employee business expenses claimed on

the Schedule A, it appears that the DISD reimbursement policy entitled petitioner

to reimbursement for any related expense, including travel, he may have incurred

on behalf of the DISD. Petitioner did not seek reimbursement from the DISD for

those expenses, and therefore petitioners are not entitled to a deduction for them.

See Podems v. Commissioner, 24 T.C. 22-23; Noz v. Commissioner, T.C.

Memo. 2012-272, at *22.

II. Educator Expenses

      Petitioners claimed a $250 deduction for educator expenses related to Mrs.

Rodriguez’s employment.

      Effective for tax years beginning after December 31, 2001, elementary and

secondary school teachers may deduct the cost of certain school supplies up to

$250 from their gross income. Sec. 62(a)(2)(D), (d)(1). Section 62(d)(1)(A)

defines an eligible educator as follows:

             (A) In general.--For purposes of subsection (a)(2)(D), the term
      “eligible educator” means, with respect to any taxable year, an
      individual who is a kindergarten through grade 12 teacher, instructor,
                                       - 15 -

      counselor, principal, or aide in a school for at least 900 hours during a
      school year.

      Mrs. Rodriguez did not testify at the trial. Otherwise, petitioners have failed

to show that she fits within the definition of an eligible educator. Accordingly,

petitioners are not entitled to a $250 deduction for educator expenses related to

Mrs. Rodriguez.

III. Moving Expenses

      Section 217(a) allows as a deduction “moving expenses paid or incurred

during the taxable year in connection with the commencement of work by the

taxpayer as an employee or as a self-employed individual at a new principal place

of work.” Section 217(b) generally defines the term “moving expenses” as the

reasonable expenses of moving household goods and personal effects from the

former residence to the new residence and related travel.

      Petitioners resided at the same address during 2009, 2010, and 2011.

Petitioner was employed at the same principal place of work, the DISD, during

those years. Neither petitioner moved “in connection with the commencement of

work by the taxpayer as an employee or as a self-employed individual at a new

principal place of work.” Accordingly, petitioners are not entitled to a deduction

for moving expenses.
                                         - 16 -

IV. Additional Child Tax Credit

      Petitioners claimed entitlement to an additional child tax credit for their

daughter who was over 17 years of age at the time.

      Section 24(a) allows a taxpayer a $1,000 credit against income tax with

respect to each qualifying child. For purposes of section 24, a “qualifying child”

is a qualifying child of the taxpayer, as defined in section 152(c), who has not yet

reached the age of 17. Sec. 24(c). Because petitioners’ daughter was over 17

years of age during the year in issue, petitioners are not entitled to the additional

child tax credit claimed.

V. COI Income

      Where an information return, such as Form 1099-C, serves as the basis for

the determination of a deficiency, the burden of production may shift to the

Commissioner. See sec. 6201(d); Del Monico v. Commissioner, T.C. Memo.

2004-92, slip op. at 6. If a taxpayer in a court proceeding asserts a reasonable

dispute with respect to any item of income reported on an information return and

has fully cooperated, then the Commissioner must produce reasonable and

probative information concerning the deficiency in addition to the information

return. Sec. 6201(d).
                                        - 17 -

      Petitioners have not raised a reasonable dispute with respect to the accuracy

of the information return. Although petitioners contend that the COI income at

issue in this case was discharged in Mrs. Rodriguez’s bankruptcy, the record

shows that her bankruptcy case was dismissed without granting a discharge.

Petitioners further contend that the amount of income reported on the Form

1099-C is incorrect, but they have provided no evidence to support that

contention. Moreover, it is clear that petitioners have failed to cooperate with

respondent, and therefore, the Court concludes that respondent does not have the

burden of production under section 6201(d).

      In general, the term “income” as used in the Code means income from any

source, including income from the discharge of indebtedness. Sec. 61(a)(12);

Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-430 (1955). As noted,

Citibank issued to Mrs. Rodriguez a Form 1099-C, reporting that it had discharged

the $3,561 debt that she owed.

      The moment it becomes clear that a debt will never be repaid, that debt must

be viewed as having been discharged. Cozzi v. Commissioner, 88 T.C. 435, 445

(1987). The determination of whether discharge of indebtedness has occurred is

fact specific and often turns on the subjective intent of the creditor as manifested

by an objectively identifiable event. Id. The issuance of a Form 1099-C is an
                                         - 18 -

identifiable event, but it is not dispositive of an intent to cancel indebtedness.

Owens v. Commissioner, T.C. Memo. 2002-253, aff’d in part, rev’d in part and

remanded 67 F. App’x 253 (5th Cir. 2003).

      Any identifiable event that fixes the loss with certainty may be taken into

consideration. Cozzi v. Commissioner, 88 T.C. 445 (citing United States v. S.S.

White Dental Mfg. Co., 274 U.S. 398 (1927)); cf. sec. 1.6050P-1(b)(2)(i), (iv),

Income Tax Regs. (providing an exclusive list of eight “identifiable event[s]”

under which debt is discharged for information reporting purposes). According to

section 1.6050P-1(b)(2)(i)(G), Income Tax Regs., an identifiable event occurs

when there is “[a] discharge of indebtedness pursuant to a decision by the creditor,

or the application of a defined policy of the creditor, to discontinue collection

activity and discharge debt”. According to section 1.6050P-1(b)(2)(i)(H) and (iv),

Income Tax Regs., there is a rebuttable presumption that an identifiable event has

occurred during a calendar year if a creditor has not received a payment on an

indebtedness at any time during a 36-month testing period ending at the close of

the year.

      According to petitioners, the debt should not have been deemed canceled in

2010 with the filing of Form 1099-C. Instead, relying on section

1.6050P-1(b)(2)(i)(H) and (iv), Income Tax Regs., they assert that the COI
                                       - 19 -

actually occurred in a year before 2010 after they stopped making payments on the

debt for more than 36 months. Their argument, however, is undermined, at least in

part, by their failure to report the COI income on any of their Federal income tax

returns filed before 2010.

      Respondent, if only by implication, contends that the identifiable event that

triggered the COI occurred in 2010 when Citibank, in accordance with its internal

policies, decided to cancel the debt and issue Form 1099-C. See sec.

1.6050P-1(b)(2)(i)(G), Income Tax Regs.

      According to Citibank’s identification criteria, the account was not eligible

for issuance of a Form 1099-C in 2008 or 2009. On September 12, 2010,

Citibank, in accordance with its internal policies, issued to Mrs. Rodriguez a Form

1099-C reporting that it had discharged debt of $3,561. Under the circumstances,

we find that the issuance of the Form 1099-C constitutes the identifiable event

contemplated in section 1.6050P-1(b)(2)(i)(G), Income Tax Regs. That event

occurred in 2010 and that is the year that petitioners realized and must recognize

the COI income.5

      5
        Petitioners alternatively argue that the COI occurred when the statute of
limitations on collection in Texas expired sometime before 2010. Section
1.6050P-1(b)(2)(i)(C), Income Tax Regs., recognizes this situation as an
identifiable event that cancels indebtedness, generates COI income, and requires
                                                                       (continued...)
                                         - 20 -

       Lastly, petitioners point out that they did not receive the Form 1099-C. The

nonreceipt of a Form 1099-C, however, does not cause COI income to be

excludable from income. See Rinehart v. Commissioner, T.C. Memo. 2002-71,

slip op. at 6.

       5
        (...continued)
the issuance of a Form 1099-C. Enumerated as the third of eight “identifiable
event[s]” giving rise to COI income, subdivision (i)(C) provides:

               (C) A cancellation or extinguishment of an indebtedness upon
       the expiration of the statute of limitations for collection of an
       indebtedness, subject to the limitations described in paragraph
       (b)(2)(ii) of this section, or upon the expiration of a statutory period
       for filing a claim or commencing a deficiency judgment proceeding;

       As noted, sec. 1.6050P-1(b)(2)(i)(C), Income Tax Regs., is limited by sec.
1.6050P-1(b)(2)(ii), Income Tax Regs., which states that “an identifiable event
occurs under paragraph (b)(2)(i)(C) of this section only if, and at such time as, a
debtor’s affirmative statute of limitations defense is upheld in a final judgment or
decision of a judicial proceeding”. Because petitioners have not provided any
evidence that they have raised an affirmative statute of limitations defense that
was upheld in a final judgment or decision of a judicial proceeding, they have
failed to establish that a corresponding identifiable event occurred pursuant to sec.
1.6050P-1(b)(2)(i)(C), Income Tax Regs.
                                        - 21 -

VI. Section 6651(a)(1) Addition to Tax

      Petitioner’s return was due to be filed on or before October 15, 2011,6 but it

was not filed until April 6, 2014. See secs. 6072(a), 7503. Consequently,

respondent imposed a section 6651(a)(1) addition to tax.

      Section 6651(a)(1) authorizes the imposition of an addition to tax for failure

to file a timely return unless the taxpayer proves that such failure is due to

reasonable cause and is not due to willful neglect. See also United States v. Boyle,

469 U.S. 241, 245 (1985); Harris v. Commissioner, T.C. Memo. 1998-332.

Section 6651(a)(1) imposes 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, not to exceed 25% in the aggregate.

      Respondent’s records demonstrate that petitioners’ return was not timely

filed, and petitioners do not dispute the point. Respondent’s section 7491(c)

burden of production has been met with respect to the imposition of the section

6651(a)(1) addition to tax, and because petitioners have failed to demonstrate that

their failure to file timely their 2010 return was due to reasonable cause,

respondent’s imposition of a section 6651(a)(1) addition to tax is sustained.

      6
      The due date (with extensions) for filing their return was October 15, 2011,
pursuant to the automatic extension petitioners filed.
                                        - 22 -

VII. Section 6662(a) Accuracy-Related Penalty

      Lastly, we consider whether petitioners are liable for a section 6662(a)

accuracy-related penalty for the year in issue. Respondent bears the burden of

production with respect to the imposition of a section 6662(a) accuracy-related

penalty. See sec. 7491(c).

      The petition, answer, and pretrial memoranda all reference section 6662(a)

and show that the imposition of the penalty has not been conceded by either party,

either expressly or implicitly. That being so, we note that as part of his burden of

production, respondent was obligated to show that the provisions of section 6751

have been satisfied.7 See Graev v. Commissioner, 149 T.C. 485 (2017),

supplementing and overruling in part 147 T.C. 460 (2016). Because there is no

evidence in the record that shows respondent’s compliance with section 6751,

petitioners are not liable for the section 6662(a) accuracy-related penalty.

      To reflect the foregoing,

                                                 Decision will be entered under

                                       Rule 155.

      7
       Sec. 6751(b)(1) provides: “No penalty under this title shall be assessed
unless the initial determination of such assessment is personally approved (in
writing) by the immediate supervisor of the individual making such determination
or such higher level official as the Secretary may designate.”