                  T.C. Summary Opinion 2004-90



                     UNITED STATES TAX COURT



                   BARRY APPEL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 15310-03S.            Filed July 14, 2004.


     Barry Appel, pro se.

     Brian E. Derdowski, Jr., for respondent.



     PANUTHOS, Chief Special Trial Judge:   This case was heard

pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect at the time the petition was filed.    The

decision to be entered is not reviewable by any other court, and

this opinion should not be cited as authority.   Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for the years in issue, and all Rule

references are to the Tax Court Rules of Practice and Procedure.
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     Respondent issued petitioner three separate notices of

deficiency, each dated June 6, 2003, determining that petitioner

was liable for deficiencies in Federal income taxes and additions

to tax in the following amounts for the 1997, 1998, and 1999

taxable years:

                                            Additions to Tax
     Year   Deficiency    Sec. 6651(a)(1)     Sec. 6651(a)(2)   Sec. 6654

     1997    $30,884        $2,905.88        To be determined   $1,371.69
     1998     29,573         3,044.03        To be determined      934.42
     1999     11,330           100.00        To be determined      539.47

     Petitioner filed a timely petition with the Court in which

he does not dispute the deficiencies determined, but only

disputes the additions to tax.          Respondent did not file an answer

to the petition.1

     At the time of trial, respondent filed a pretrial memorandum

wherein he asserted increased deficiencies and increased

additions to tax.        The parties filed a stipulation of facts

wherein petitioner agreed to the increased deficiencies and

increased additions to tax under section 6654 and also agreed

that if the failure to file tax returns for the 1997, 1998, and

1999 taxable years was not due to reasonable cause, then the


     1
        Petitioner elected to have his case conducted as a small
tax case under the proceedings of sec. 7463. For the election to
be valid, the “amount of the deficiency placed in dispute” may
not exceed $50,000 for any one taxable year. Sec. 7463(a), (e);
Kallich v. Commissioner, 89 T.C. 676, 679-680 (1987). Taking
into account petitioner’s concessions in the present case, we
concur with his election to conduct his case as a small tax case
because the amount placed in dispute for each of the years in
issue does not exceed $50,000.
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increased additions to tax under section 6651(a)(1) applied as

follows:

                                           Additions to Tax
     Year       Deficiency        Sec. 6651(a)(1)           Sec. 6654
                                      1
     1997        $30,087                $3,030               $1,407
     1998         30,234                 3,548                  798
     1999         52,625                 9,601                1,629
         1
          Although the amount of deficiency actually decreased for
     1997, the addition to tax under sec. 6651(a)(1) increased for the
     corresponding taxable year. Respondent attributes this increase
     to a “miscalculation” in the notice of deficiency.

     After concessions,2 the issue for decision is whether

petitioner is liable for the additions to tax and increased

additions to tax under section 6651(a)(1) for the 1997, 1998, and

1999 taxable years.3




     2
        Respondent concedes that petitioner is not liable for any
additions to tax under sec. 6651(a)(2) for the 1997, 1998, and
1999 taxable years. Petitioner concedes that he is liable for
the deficiencies in Federal income taxes for the 1997 through
1999 taxable years, including increased deficiencies, as
indicated in respondent’s pretrial memorandum and the stipulation
of facts. Petitioner further concedes that he is liable for the
additions to tax under sec. 6654 for the 1997, 1998, and 1999
taxable years.
     3
        Although respondent did not file an answer, he seeks
increased deficiencies and increased additions to tax. Because
of the stipulation of facts and petitioner’s lack of objection,
the issue of increased additions to tax under sec. 6651(a)(1) is
tried with petitioner’s express or implied consent. See Rule
41(b)(1); Woods v. Commissioner, 91 T.C. 88, 93 (1988); McGee v.
Commissioner, T.C. Memo. 2000-308; Wicker v. Commissioner, T.C.
Memo. 1993-431, affd. without published opinion 50 F.3d 12 (8th
Cir. 1995). Moreover, the issue of increased additions to tax
under sec. 6654 for the 1997 and 1999 taxable years is
computational in nature. See sec. 6654(a).
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Background

     Some of the facts have been stipulated, and they are so

found.   The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   At the time the petition

was filed, petitioner resided in Guttenberg, New Jersey.

     From January 1, 1997, to April 1, 1999, petitioner was a

stockbroker at the American Stock Exchange in New York, New York.

During the years in issue, petitioner had various health problems

that required him to undergo surgery on an outpatient basis with

follow-up medical appointments about once a month.   Also during

the years in issue, petitioner’s spouse, Barbara Appel, suffered

from severe health problems, and petitioner had to care for her

and manage the affairs of the household.   Petitioner nevertheless

continued working at the American Stock Exchange with a few days

of absences due to his surgery and related follow-up medical

appointments.

     Petitioner requested and received extensions to file his

Federal income tax returns for the 1997, 1998, and 1999 taxable

years.   Taking into account such extensions, petitioner’s 1997

return was due October 15, 1998; his 1998 return was due October

15, 1999; and his 1999 return was due October 15, 2000.    However,

petitioner did not file any Federal income tax returns by the

corresponding due dates.
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     After filing the petition, petitioner prepared returns for

the 1997, 1998, and 1999 taxable years and then sent them via

certified mail to respondent’s New Jersey Appeals Office in an

envelope bearing a postmark date of “December 10, 2003”.

Petitioner did not remit any payment with these returns.

     Respondent received and accepted the returns as filed on

December 11, 2003.    The 1997 return reported “total tax” of

$30,087.   The 1998 return reported “total tax” of $30,234.     The

1999 return reported “total tax” of $52,625.    The amounts

reflected on the returns provided the bases for the increased

deficiencies for the 1998 and 1999 taxable years and the

correlative increased additions to tax under section 6651(a)(1)

and section 6654.

     Petitioner contends that he should not be liable for the

additions to tax under section 6651(a)(1) because his failure to

file his returns for the 1997, 1998, and 1999 taxable years was

due to reasonable cause and not due to willful neglect.

Specifically, petitioner contends that his health problems and

those of his spouse should relieve him of any liability under

section 6651(a)(1).

Discussion

     The Commissioner bears the burden of proof in respect of any

increased additions to tax.    Beck Chem. Equip. Corp. v.

Commissioner, 27 T.C. 840, 856 (1957).    The Commissioner also has
                                 - 6 -

the “burden of production in any court proceeding with respect to

the liability of any individual for any * * * addition to tax”

under section 6651(a).     Sec. 7491(c).   To meet this burden, the

Commissioner must come forward with sufficient evidence

indicating that it is appropriate to impose the relevant penalty

or addition to tax.   Higbee v. Commissioner, 116 T.C. 438, 446

(2001).   Once the Commissioner meets his burden of production,

the taxpayer must come forward with evidence sufficient to

persuade a court that the Commissioner’s determination is

incorrect.   Id. at 447.    The taxpayer also bears the burden of

proof with regard to issue of reasonable cause.      Id. at 446.

     In the present case, respondent has satisfied his burden of

production under section 7491(c) by establishing that

petitioner’s 1997, 1998, and 1999 Federal income tax returns were

not timely filed.   Petitioner does not assert, nor did he present

any evidence, that the returns for the years in issue were

received or mailed before the due dates.

     Section 6651(a)(1) imposes an addition to tax of 5 percent

per month of the amount of tax required to be shown on the

return, not to exceed 25 percent, for failure to timely file a

return.   The addition to tax under section 6651(a)(1) is imposed

unless the taxpayer establishes that the failure was due to

reasonable cause and not willful neglect.     Illness may constitute

reasonable cause so long as the taxpayer can establish that
                               - 7 -

illness incapacitated the taxpayer to such a degree that he or

she was unable to file the return.     See Snyder Air Prods., Inc.

v. Commissioner, 71 T.C. 709, 718 (1979); Marrin v. Commissioner,

T.C. Memo. 1997-24, affd. 147 F.3d 147 (2d Cir. 1998).

     The record does not establish that the failures to file were

due to reasonable cause and not willful neglect.     While

petitioner and Barbara Appel had health problems during the years

in issue, petitioner continued working at the American Stock

Exchange.   Petitioner’s health did not prevent him from caring

for his spouse, managing the affairs of the household, or

requesting an extension to file his 1997, 1998, and 1999 Federal

income tax returns.   While we sympathize with the ongoing medical

issues of petitioner and his spouse and acknowledge the

substantial amount of time and energy expended by petitioner as a

caregiver to his spouse, we do not conclude that petitioner was

so incapacitated so as to constitute reasonable cause for failing

to file returns for the years in issue.     Respondent is sustained

on this issue.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing and the parties’ concessions,


                                            Decision will be entered

                                       under Rule 155.
