In Margaret V. Stine (U.S. Court of Federal Claims) the taxpayer failed to timely file gift tax returns. The late-filed returns involved a substantial amount of tax and the penalty was some $450,000.
The Court noted a serious illness can provide reasonable cause for later filing. The Court cited an Appeals Court case which said "We believe the type of illness or debilitation that might create reasonable cause is one that because of severity or timing makes it virtually impossible for the taxpayer to comply--things like emergency hospitalization or other incapacity occurring around tax time."
The Court noted that the taxpayer's knee surgery required only a brief hospitalization. She also suffered a variety of symptoms during the course of a year including respiratory infections, knee pain, medication reactions, heart palpitations and blurred vision, but that did not provide reasonable cause. These did not continuously incapacitate her during the time the return should have been filed. Moreover, the periods of incapacity were vague as to beginning and end dates. The Court found her liable for the penalties.
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