T.C. Memo. 2011-81



                      UNITED STATES TAX COURT



                PAMELA B. RUSSELL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 24413-05.               Filed April 6, 2011.



     Mark E. Cedrone, for petitioner.

     Jack T. Anagnostis, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     WELLS, Judge:   Respondent determined that petitioner was

liable for a deficiency and additions to tax for failure to file

timely pursuant to section 6651(a)(1) and failure to pay timely

pursuant to section 6651(a)(2) for her 2001 tax year.1


     1
      All section references are to the Internal Revenue Code in
                                                   (continued...)
                               - 2 -

After concessions,2 the sole issue remaining for decision is

whether petitioner’s failures to file timely and pay timely were

justified by reasonable cause and not due to willful neglect.

                        FINDINGS OF FACT

     Some of the facts and certain exhibits have been stipulated.

The parties’ stipulations of fact are incorporated in this

opinion by reference and are found accordingly.     At the time she

filed her petition, petitioner resided in Pennsylvania.

     Petitioner is a medical doctor in the neonatology unit at

the Children’s Hospital of Philadelphia, where she worked as an

employee for all relevant periods.     Petitioner is and was married

to Bertram Royce Russell (Mr. Russell) at all relevant times.

Petitioner and Mr. Russell (hereinafter sometimes referred to as

the couple) maintained separate finances and separate checking

accounts.   Petitioner was responsible for handling the family’s

day-to-day living expenses, and Mr. Russell took primary

responsibility for their children’s tuition and college savings,

the couple’s retirement savings, and all tax matters.    During the

periods in issue Mr. Russell owned an interest in Basement




     1
      (...continued)
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
     2
      Petitioner does not dispute the deficiency.
                                - 3 -

Doctor, Inc. (Basement Doctor), a business that waterproofed

basements.

     During the late 1980s or early 1990s, Mr. Russell introduced

petitioner to Jay Bagdis (Mr. Bagdis).   Mr. Russell told

petitioner that Mr. Bagdis was the couple’s financial adviser and

tax attorney.   Mr. Russell interacted with Mr. Bagdis more than

petitioner did because of the couple’s division of labor

regarding finances, but petitioner did meet Mr. Bagdis on a

number of occasions over the years.

     The Internal Revenue Service (IRS) examined the couple’s

returns3 at some point after Mr. Bagdis had assumed his role as

their financial adviser and tax attorney.    Mr. Bagdis and his law

firm represented petitioner and Mr. Russell during that

examination.    The examination was resolved in the couple’s favor,

and they received a refund from the IRS.    The successful

resolution of the IRS examination by Mr. Bagdis and his firm gave

petitioner confidence in Mr. Bagdis, leading her to believe that

he was extremely competent.   Petitioner relied on Mr. Bagdis for

tax advice.

     Mr. Bagdis advised petitioner during early 1999 that she

should submit a Form W-4, Employee’s Withholding Allowance



     3
      The record does not reveal the year or years covered by
this examination, but it does indicate that Mr. Bagdis’ firm
filed an amended return on behalf of the couple for their 1994
tax year.
                                 - 4 -

Certificate, to Children’s Hospital claiming that she was exempt

from income tax withholding for 1999.    In accordance with Mr.

Bagdis’ advice, petitioner signed a Form W-4 claiming the

exemption on January 27, 1999.    Mr. Bagdis’ law firm submitted

the Form W-4 to Children’s Hospital, accompanied by a letter from

the firm.

     Petitioner was required to file a Federal income tax return

for 1999.   However, petitioner did not timely file her 1999

return because Mr. Bagdis advised her that her husband’s

business, Basement Doctor, had sustained significant losses

during 1999 that would offset the couple’s income from

petitioner’s salary, but that those losses needed to be

calculated exactly before the couple filed their return.

Petitioner followed Mr. Bagdis’ advice and did not timely file

her 1999 tax return.   On February 21, 2001, respondent sent a

delinquency notice to petitioner, informing her that respondent’s

records showed she had not filed a tax return for 1999 and asking

her to file that return.   The couple filed a joint tax return for

their 1999 tax year on October 31, 2001.    On their 1999 return,

the couple reported $153,786 in wages and salary income, but the

couple reported a loss of $100,000 from Mr. Russell’s business.

The couple reported an overpayment of $16,289 for 1999, and they

received a refund of $16,417.57 on December 24, 2001.
                               - 5 -

     Substantially the same series of events took place with

regard to the couple’s 2000 tax return.   Mr. Bagdis again advised

petitioner that she should wait until he had every detail of the

return correct, including exact figures for the losses from

Basement Doctor.   Respondent again sent delinquency notices to

petitioner, dated July 8 and September 2, 2002, informing

petitioner that respondent’s records showed she had not filed a

tax return for 2000 and asking her to file that return.   The

couple filed a joint tax return for their 2000 tax year on

September 13, 2002.   On that return the couple reported $163,793

in wages and salary income and another $100,000 loss from

Basement Doctor.   The couple again reported an overpayment and

received a refund of $2,696.

     Petitioner likewise was required to file a return for 2001,

the year in issue, but was again advised by Mr. Bagdis not to

file her return until he had calculated the exact losses from her

husband’s business.   Petitioner understood that Basement Doctor

was divided into three “parts” by State, one part each in

Delaware, Pennsylvania, and New Jersey.   Mr. Bagdis explained to

petitioner that Basement Doctor’s 1999 losses were from the

Pennsylvania business, the 2000 losses were from the Delaware

business, and the 2001 losses would be from the New Jersey

business.   Mr. Bagdis told petitioner that the losses from
                               - 6 -

Basement Doctor’s New Jersey business would be even greater than

the losses from Pennsylvania and Delaware.   Petitioner knew that

her 2001 return was due on April 15, 2002, but, in accordance

with Mr. Bagdis’ instructions, petitioner did not file her 2001

return when it was due.

     On January 15, 2002, petitioner signed and submitted a Form

W-4 to Children’s Hospital, reporting two allowances and not

claiming that she was exempt from Federal tax withholding for

2002.   Petitioner understood that she was no longer exempt from

withholding because her husband no longer had an interest in

Basement Doctor, and the couple would not have any losses to

offset petitioner’s salary for 2002.

     Respondent sent delinquency notices to the couple on April

28 and June 23, 2003, informing them that respondent’s records

indicated that they had not filed a tax return for 2001 and

asking them to file that return.

     At some point during October 2004, IRS agents visited

petitioner while she was working at Children’s Hospital to serve

her with a subpoena for records.   Around the same time,

petitioner understood that the IRS had also seized files from Mr.

Bagdis’ offices.   After she received a subpoena from the IRS and

learned of the IRS raid on Mr. Bagdis’ offices, she became very

concerned and asked to meet with Mr. Bagdis as soon as possible.
                                 - 7 -

When petitioner met with Mr. Bagdis, she received the same

explanation from him:   he expected that large losses from

Basement Doctor would offset her salary income from 2001 and that

she should wait to file her return until Mr. Bagdis could

calculate the exact numbers.   Petitioner continued to rely on Mr.

Bagdis’ advice.

     On or about April 6, 2005, Mr. Bagdis sent petitioner and

her husband a letter regarding their 2001, 2002, and 2003 taxes.

In the letter, Mr. Bagdis informed the couple that he no longer

had access to many of the couple’s records because his files had

been seized by Federal agents.    However, he told the couple that

he had nevertheless attached “pro forma” Forms 1040, U.S.

Individual Income Tax Return, for the couple as married, filing

separately.   In the letter, Mr. Bagdis explained that the “pro

forma” returns were based on “limited historical data” available

in some computer files to which he still had access, as well as

some new information supplied by the couple.   Mr. Bagdis informed

the couple that although the “pro forma” returns he had prepared

were for the couple filing separately, they probably would have a

lower tax liability if they filed a joint return.   Specifically,

he told the couple that if they filed a joint return for 2001,

the Basement Doctor losses would offset petitioner’s salary

income and result in a tax liability of close to zero.   He

advised the couple:
                                 - 8 -

     Again, with a refund, there are no real consequences to
     filing late, except that you lose interest on the refund
     amount, which only starts to accrue after a return is filed.
     You can always later file a joint return, but once a joint
     return is filed, it is more difficult to undo, so I
     projected a “worst case” of Pam filing separately.

The couple had filed joint returns for 1999 and 2000.

     Petitioner has no recollection of ever seeing the “pro

forma” returns referred to in Mr. Bagdis’ letter, nor does she

recall reading Mr. Bagdis’ letter dated April 6, 2005.   There is

no evidence in the record that petitioner ever received the “pro

forma” returns or that they were actually attached to Mr. Bagdis’

letter dated April 6, 2005.

     On or about April 25, 2005, respondent sent petitioner a

letter informing her that respondent still had not received her

income tax return for 2001 and providing petitioner with

respondent’s calculation of petitioner’s income tax liability for

2001.   Upon receipt, petitioner or Mr. Russell delivered the

letter to Mr. Bagdis.   At that time Mr. Bagdis again explained to

petitioner that he was waiting until all of the losses from

Basement Doctor had been captured.

     Mr. Bagdis wrote a letter responding to the IRS’ letter for

petitioner, which petitioner then typed on her stationery and

sent to respondent on or about May 24, 2005.   The letter

petitioner signed reported that most of her records had been

seized by Federal agents when they raided Mr. Bagdis’ offices.

The letter explained that petitioner was therefore unable to
                                 - 9 -

access the records related to her 2001 tax year and that “there

is no further action that can be taken at this time.”

     Petitioner apparently received at least one more letter from

the IRS, dated August 30, 2005, which also included a proposed

tax return for 2001.   Petitioner again responded to the IRS with

a letter drafted by Mr. Bagdis and stating that petitioner did

not have access to the records she needed to prepare her 2001 tax

return since those records had been seized.   The letter objected

to the IRS’ proposed tax return because it did not include the

losses from Basement Doctor, which the letter stated were

expected to offset petitioner’s remaining income and reduce her

tax obligation to “near zero.”

     Respondent subsequently issued petitioner a notice of

deficiency for her 2001 tax year, dated October 5, 2005.    After

receiving the notice of deficiency, petitioner again consulted

Mr. Bagdis, who filed a petition with this Court on her behalf.

     Sometime during December 2005, petitioner received a call

from John Pease, an attorney involved in the investigation of

Mr. Bagdis, who advised her that she should retain separate

counsel and should not be relying on Mr. Bagdis.4   As a result




     4
      Petitioner identified John Pease as the attorney who was
then representing Mr. Russell in the investigation. It appears
that John Pease was actually the Assistant U.S. Attorney involved
in the investigation.
                              - 10 -

of the conversation with John Pease, petitioner began to doubt

Mr. Bagdis’ advice, and she did retain separate counsel, Thomas

Bergstrom (Mr. Bergstrom).   From the time around December 2005

when she first spoke with Mr. Bergstrom, petitioner had no

further interactions with Mr. Bagdis except to request that he

withdraw as her attorney.

     Petitioner first met with Mr. Bergstrom, a criminal defense

attorney, during January 2006.   At the time petitioner retained

Mr. Bergstrom, both Mr. Bagdis and Mr. Russell were under

criminal investigation by the U.S. Attorney’s Office for the

Eastern District of Pennsylvania.   Mr. Bergstrom was concerned

that the investigation might also expand to include petitioner.

Over the next 11 months, Mr. Bergstrom met with the U.S.

Attorney’s Office on several occasions, and he hired a certified

public accountant to prepare a tax return for petitioner’s 2001

tax year.   It took 11 months for Mr. Bergstrom, the certified

public accountant, and petitioner to calculate and pay

petitioner’s 2001 tax liability.

     Consistent with calculations made by that accountant, Mr.

Bergstrom mailed the IRS a letter on November 27, 2006, enclosing

a check from petitioner in payment of her 2001 tax liability.

However, petitioner did not submit an income tax return at that

time.
                               - 11 -

     It was not until November 2007, after receiving a letter

from the U.S. Attorney’s Office informing Mr. Bergstrom that

petitioner would not be prosecuted for a criminal offense, that

Mr. Bergstrom felt comfortable submitting drafts of petitioner’s

tax returns to an IRS criminal agent for inspection.   In

accordance with a conversation he had with an IRS criminal agent,

Mr. Bergstrom submitted the Forms 1040 to the IRS criminal agent

as unsigned “drafts” for the IRS to examine.   Those Forms 1040

indicated that petitioner was married, filing separately.    Mr.

Bergstrom understood that the IRS would inspect the draft returns

and then let Mr. Bergstrom know whether they agreed that the

draft returns were accurate.   It was only several years later

that petitioner actually signed the “draft” Forms 1040.     Pursuant

to an agreement with respondent, at that time petitioner included

an asterisk on those forms noting that were effective as of

November 2006.

                               OPINION

     Section 6651(a)(1) imposes an addition to tax for the

failure to file a required return timely unless the taxpayer can

establish that such failure was due to “reasonable cause and not

due to willful neglect”.   United States v. Boyle, 

,

245 (1985).   The Commissioner bears the initial burden of

production to introduce evidence that the return was filed late.

See sec. 7491(c).   The taxpayer then bears the burden of proving
                               - 12 -

that the late filing was due to reasonable cause and not willful

neglect.   United States v. Boyle, supra at 245; Higbee v.

Commissioner, 

, 447 (2001).     Because the parties

agree that petitioner’s 2001 tax return was filed untimely,

petitioner must prove that the untimely filing was due to

reasonable cause and not willful neglect.    See Rule 142(a);

Higbee v. Commissioner, supra at 446-447.

      Courts have consistently held that the standard to be

applied under section 6651(a) is one of “ordinary business care

and prudence”, as required by section 301.6651-1(c)(1), Proced. &

Admin. Regs.   United States v. Boyle, supra at 246 n.4.    Although

the statute speaks of willful neglect, no finding of willfulness

is necessary to hold a taxpayer liable for the addition to tax.

prove that their failure to file on

time did not result from carelessness, reckless indifference, or

intentional failure.

both that

petitioner displayed willful neglect and that she lacked

reasonable cause when she failed to file her tax return timely,

if we find that petitioner did not prove she had reasonable cause

for filing late, we need not consider whether she acted with

willful neglect.   Accordingly, we will first consider whether

petitioner proved that her failure to file timely was the result

of reasonable cause.
                               - 13 -

     Courts have frequently held that a taxpayer’s reasonable

reliance on the advice of an accountant or attorney regarding a

question of law, even when such advice turns out to be mistaken,

constitutes “reasonable cause” and is consistent with “ordinary

business care and prudence”.

(and cases cited

thereat).    Requiring taxpayers to challenge their attorneys or

seek second opinions would negate the purpose of relying on an

expert, and such actions are not necessary under the standard of

“ordinary business care and prudence”.

     We have divided into three categories the holdings in cases

considering whether reliance on an expert’s advice that no return

had to be filed constituted reasonable cause.5   See Estate of La

Meres v. Commissioner, 

, 315-317 (1992).     In the first

category of cases, courts held that the section 6651(a)(1)

addition applied because some element of the reliance defense was

missing:    The taxpayers did not fully disclose all relevant

information to the expert, did not prove that the expert actually

gave the advice upon which they claimed to rely, or failed to

establish that the individual giving advice was actually an




     5
      The situation in United States v. Boyle, 

(1985), constitutes a fourth and separate category: where the
taxpayer relied on the agent to actually file the return. The
Supreme Court held that the duty to file the return is
nondelegable and reliance on an agent to file the return is not
reasonable cause for failing to file it on time.

expert upon whose advice it was reasonable to rely.   See

(and cases cited thereat).

     In the second category of cases, the taxpayers claimed that

they did not timely file returns because they relied on an

expert’s advice that no additions to tax would be due because

they had no tax liability.   The expert in such cases never told

the taxpayers they were not required to file a return, nor did

the expert provide an incorrect return date.   In such cases,

courts have held that the failure to file was not due to

reasonable cause because the expert upon whose advice the

taxpayers claimed to rely did not actually tell them that they

did not have to file a return.   See

(and cases cited

thereat).

     Finally, in the third category of cases, courts have found

that reliance on an expert was reasonable cause for failing to

file timely a return because the taxpayers made full disclosure

to the expert, relied in good faith on the expert’s advice, and

did not otherwise know that the return was due.   See

(and cases cited thereat).   The third category includes both

cases in which the expert advised that the taxpayers were not

required to file a return and cases in which the expert provided

erroneous advice as to the date the return was due.

(and cases cited thereat).   The third category is distinct

from the first two because in the first two categories the
                                - 15 -

taxpayers’ claimed reliance either was not proven or was not

reasonable.

several different contentions that

her failure to file timely was due to reasonable cause, which we

will address in turn.

I.   Whether Petitioner Was Advised That Submitting a Return That
     Was Not Completely Accurate Would Be Fraudulent and
     Perjurious

     Petitioner’s primary contention is unique.     She testified

that Mr. Bagdis advised her to wait until Mr. Russell’s business

losses were calculated before filing her tax returns because

filing a return that was not correct in every detail would be

fraudulent and signing such a return would constitute perjury.

Petitioner maintains that, following his advice, she filed late

returns for 1999 and 2000 because Mr. Bagdis and Mr. Russell did

not have exact numbers for Basement Doctor’s losses at the time

her income tax returns were due.    Likewise, she did not file her

income tax return for 2001 on April 15, 2002, even though she

knew it was due on that date.

     Petitioner contends that she should not be liable for the

section 6651(a)(1) addition to tax because she exercised ordinary

business care and prudence in filing a late income tax return on

her attorney’s advice that filing a return that was not correct

in every detail would be perjurious.     We need not accept a

taxpayer’s testimony when it is improbable, self-serving, and
                              - 16 -

uncorroborated by other evidence.   See, e.g., Baird v.

Commissioner, 

, 493 (3d Cir. 1970), vacating T.C.

Memo. 1969-67; Shea v. Commissioner, 

, 189 (1999);

Tokarski v. Commissioner, 

, 77 (1986).   For the reasons

explained below, we decline to accept petitioner’s testimony that

Mr. Bagdis advised her that she had to wait for the Basement

Doctor losses to be calculated before filing her return so as to

avoid committing fraud and perjury.

     According to petitioner’s testimony, Mr. Bagdis gave her

such advice on at least three occasions.   The first time was

around the time her 1999 tax return was due.   Mr. Bagdis

allegedly repeated the same advice during a meeting with

petitioner soon after she had received a subpoena from the IRS

during October 2004.   The final meeting during which petitioner

claims Mr. Bagdis gave her such advice occurred sometime shortly

after she received a letter from the IRS dated April 25, 2005.

     However, the only document among the stipulated exhibits

that is signed by Mr. Bagdis fails to corroborate petitioner’s

testimony and comes close to contradicting it.   Mr. Bagdis sent

petitioner and Mr. Russell a letter dated April 6, 2005, in which

he told the couple that he had prepared “pro forma” returns for

their 2001 tax year with petitioner filing separately from her

husband.   According to the letter, the “pro forma” returns were

not based on complete data but were rather based on what limited
                               - 17 -

information was available after Mr. Bagdis’ files had been

seized.    Yet Mr. Bagdis did not warn petitioner and Mr. Russell

that filing returns with incomplete information would constitute

perjury.

     In the letter, Mr. Bagdis explained that petitioner could

file separately and later file a joint return.    He also implied

that an alternative would be for the couple to continue to delay

filing their returns, writing: “Again, with a refund, there are

no real consequences to filing late”.   (Emphasis added.)   For

their previous 2 tax years, petitioner and her husband had

followed Mr. Bagdis’ advice and filed their tax returns late.6

However, because in each of those years they were due a refund,

they suffered no penalty for their late filing.   We construe Mr.

Bagdis’ letter as assuring the couple that they could continue to

use the same strategy with their 2001 return and that there would

again be no consequences because they were due a refund.

     Mr. Bagdis’ letter, regardless of petitioner’s lack of

recollection of receiving it, fails to corroborate petitioner’s

testimony that Mr. Bagdis advised her that she would be

committing perjury if she filed any return without incorporating

the exact losses from her husband’s business.    Moreover, even if



     6
      We find suspect Basement Doctor’s losses of exactly
$100,000 for both 1999 and 2000. Such round numbers cast
additional doubt on petitioner’s story that she was waiting for
exact figures before filing her returns.
                               - 18 -

petitioner never received it, the fact that Mr. Bagdis did write

a letter in which he stated that he had prepared “pro forma”

returns based on incomplete information, in which he suggested

that petitioner could file separately and then later file a joint

return, and in which he again advised that there would be no

consequence to filing late if petitioner was due a refund,

strongly suggests that Mr. Bagdis never gave the advice

petitioner claims he did.    Instead, the letter suggests another

alternative that we find more plausible:   petitioner was relying

on Mr. Bagdis’ assurances that no tax would be due for 2001 after

Basement Doctor’s losses had been calculated and that she

therefore need not be concerned about filing her tax return late.

II.   Whether Petitioner’s Reliance on Her Adviser’s Advice That
      There Would Be No Tax Due Constitutes Reasonable Cause

      We find it more plausible to conclude that petitioner was

relying on Mr. Bagdis’ advice that no tax would be due for 2001.

She had relied on his advice when filing late tax returns for the

2 prior years, and she had received a refund both times, as Mr.

Bagdis had said she would.   Petitioner was, in effect, relying on

a scenario that she would also be entitled to a refund for 2001.

Unfortunately for petitioner, her hoped-for scenario did not

materialize, and she owed tax for 2001.    As the Court of Appeals

stated in Jackson v. Commissioner, 

, 1527 (10th Cir.

1989), affg. 

(1986):    “a presumed expert’s advice

concerning the amount of tax owed can be erroneous, and the
                               - 19 -

taxpayer must bear the risk of that error when he fails to comply

with a known duty to file a return.”    See also Estate of Hollo v.

Commissioner, T.C. Memo. 1990-449, affd. without published

opinion 

(6th Cir. 1991); Gore v. Commissioner, T.C.

Memo. 1987-425.   As a matter of law, it was unreasonable for

petitioner to file her tax return late on the basis of Mr.

Bagdis’ advice that no additions would be due because she would

owe no tax.

III. Whether Petitioner’s Reliance on Her Adviser’s Advice That
     It Was Necessary To Have Accurate Information Constitutes
     Reasonable Cause

     Petitioner’s reliance claim includes the contention that Mr.

Bagdis advised her that she should wait until she had complete

information about Mr. Russell’s business losses before filing her

return.7   We have held that reliance on an attorney’s advice that

it was necessary to wait for complete information before filing a

return does not constitute reasonable cause for a delay in

filing.    Estate of Maltaman v. Commissioner, T.C. Memo. 1997-110.

Instead, taxpayers have an obligation to file a timely return

with the best available information, and to file a later amended

return, if necessary.   Estate of Vriniotis v. Commissioner, 

, 311 (1982).   We have held that the unavailability of

information needed to calculate the tax liability does not


     7
      Of course, as we have discussed above, petitioner’s full
contention goes further and claims that Mr. Bagdis told her that
if she did not wait, she would be guilty of perjury.
                              - 20 -

constitute reasonable cause for failing to file a timely return.

Crocker v. Commissioner, 

, 913 (1989).     Accordingly,

insofar as petitioner relied on Mr. Bagdis’ advice that she

should wait for complete information before filing her return, we

conclude that such reliance does not constitute reasonable cause.

IV.   Whether Petitioner’s Reliance on Her Adviser’s Advice To
      Delay Filing During the Criminal Investigation Constitutes
      Reasonable Cause

      Finally, petitioner also contends that during the period

after she ceased to rely on Mr. Bagdis’ advice and before she

filed her 2001 income tax return, she relied on Mr. Bergstrom’s

advice not to file her return until the criminal investigation

had concluded.   It is unclear to what period petitioner contends

her defense based on reliance on Mr. Bergstrom should apply.

Although Mr. Bergstrom testified that he was concerned about the

ongoing criminal investigation and whether it might implicate

petitioner, he stated that petitioner’s tax liability was not

paid until November 2006 because it took 11 months to calculate

the liability.   Mr. Bergstrom did testify that he advised her not

to file her “draft” tax return until November 2007.    However, for

purposes of section 6651(a)(1), the addition to tax for failure

to file timely reaches the statutory maximum if the delinquency
                               - 21 -

continues longer than 4 months, and the question of reliance on

Mr. Bergstrom’s advice is therefore irrelevant.8

V.   Conclusion

     Accordingly, we hold that petitioner is liable for the

addition to tax under section 6651(a)(1) because she failed to

file her 2001 tax return timely and because she has not shown

reasonable cause for her failure.

     The sole issues we must decide in this case are whether

petitioner’s failures to file timely and pay timely were due to

“reasonable cause” and not “willful neglect”.   Sec. 6651(a)(1)

and (2).   We have restricted our discussion above to the issue of

whether petitioner proved that she had reasonable cause for her

failure to file timely pursuant to section 6651(a)(1).   However,

section 6651(a)(2) uses identical language to describe the

standard for failure to pay.   Courts considering the issue have

held that the determination of “reasonable cause” under section

6651(a)(2) should receive similar analysis to that under section

6651(a)(1).9   See E. Wind Indus., Inc. v. United States, 

      For purposes of the addition for failure to pay timely
pursuant to sec. 6651(a)(2), the statutory maximum is reached if
the delinquency continues longer than 49 months. For any month
where both additions apply, the addition pursuant to sec.
6651(a)(1) will be reduced by the amount of the addition under
sec. 6651(a)(2) pursuant to sec. 6651(c)(1).
     9
      Financial hardship is a defense unique to the failure to
pay addition to tax. See sec. 301.6651-1(c)(1), Proced. & Admin.
Regs. However, petitioner does not contend that financial
                                                   (continued...)
                              - 22 -

499, 504 n.5 (3d Cir. 1999) (“The Court’s analysis in Boyle

addressed penalties for failure to file tax returns under section

6651(a)(1).   The language concerning the standard for failure to

file a return is identical to the language in sections 6651(a)(2)

and 6656 for failure to pay and to deposit.   We see no reason why

the Court’s analysis under section 6651(a)(1) should not guide

our analysis of sections 6651(a)(2) and 6656.”); Fran Corp. v.

United States, 

, 816 n.3 (2d Cir. 1999) (“While the

analysis in Boyle addressed penalties for failure to file a

return under Section 6651(a)(1) and not for a failure to pay or

deposit taxes under Section 6651(a)(2) or Section 6656, the

language concerning the standard is identical in all three

provisions.   Unless otherwise noted, therefore, we shall inform

our analysis of Sections 6651(a)(2) and 6656 with those

precedents that address Section 6651(a)(1).”); Valen

Manufacturing Co. v. United States, 

, 1193 n.1 (6th

Cir. 1996) (“Although Boyle involved only a § 6651(a)(1)

violation, the language of the ‘reasonable cause’ exceptions in

§§ 6651(a)(2) and 6656(a) is identical and should be given the

same construction.”).

     Therefore, for the same reasons stated above in our

discussion of the addition to tax under section 6651(a)(1), we



     9
      (...continued)
hardship prevented her from timely paying her taxes.
                               - 23 -

also hold that petitioner is liable for the addition to tax under

section 6651(a)(2) for failure to pay timely the taxes due for

2001.

     The additions to tax should be calculated for the period

from April 15, 2002, when petitioner’s 2001 income tax return was

due, to November 27, 2006, when she actually paid her tax

liability.    Because the maximum additions to tax under both

section 6651(a)(1) and (2) are reached before that date,

petitioner is liable for the maximum additions under both

paragraphs.

     In reaching the foregoing holdings, we have considered all

the parties’ arguments, and, to the extent not addressed herein,

we conclude that they are moot, irrelevant, or without merit.

     To reflect the foregoing,


                                          Decision will be entered

                                     under Rule 155.