In Mario E. Cayabyab (T.C. Memo. 2012-89) the taxpayer was going through a divorce in 2006 and was struggling with the care of his children. The taxpayer's ex-wife was in possession of documents relating to their investment income. He did not attempt to retrieve these documents because his priority was to settle his divorce and take care of his children, and he believed he could settle his taxes for 2006 "later on".
The taxpayer was in good health throughout 2006 and was not hospitalized for any illness between 2006 and 2010. He was aware of his obligation to file his Form 1040 for 2006 but he did not file a timely return. The IRS sent the taxpayer a letter on November 30, 2009, requesting that petitioner file his Form 1040 for 2006. He filed the return with the IRS on October 14, 2010. The Court noted Section 6651(a)(1) imposes an addition to tax for failure to file a return on the date prescribed unless the taxpayer can establish that the failure is due to reasonable cause and not due to willful neglect. To prove reasonable cause for a failure to timely file, the taxpayer must show that he exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time. The determination of whether reasonable cause exists is based on all the facts and circumstances.
The taxpayer argued that certain documents required for filing his return were unavailable to him because of his divorce. He further argued that he was too preoccupied with the difficulties of his divorce and the care of his children to attempt to retrieve those documents.
The Court noted it has previously held that a taxpayer does not have reasonable cause for failure to file where he knew of his obligation to file but chose to make his divorce and custody battle a greater priority. Further, the unavailability of information or records does not necessarily establish reasonable cause for failure to file a timely return. The Court found the taxpayer did not demonstrate that he exercised the ordinary business care and prudence that would qualify him for relief from the Section 6651(a)(1) addition to tax. Consequently, he has not met his burden of persuasion, and the IRS's determination was sustained.
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