OM P. Soni & Anjali Soni

T.C. Memo. 2021-137UNITED STATES TAX COURT
OM P. SONI AND ANJALI SONI, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15328-15. Filed December 1, 2021.
Scott L. Kestenbaum, Richard Stephen Kestenbaum, and Jill S. Monoson,
for petitioners.
Christopher D. Davis, Michael J. De Matos, and Gennady Zilberman, for
respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COPELAND, Judge: Respondent, the Commissioner of Internal Revenue,
determined a deficiency in petitioners’ 2004 Federal income tax of $642,629, an
Served 12/01/21
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[*2] addition to tax under section 6651(a)(1)1 of $28,836 for filing their return
late, and an accuracy-related penalty under section 6662(a)2 of $128,526. After
concessions,3 the issues for decision related to tax year 2004 are whether:
(1) petitioners filed a valid joint return; (2) the period of limitations for assessment
of tax under section 6501(a) and (c)(4) expired before the issuance of the notice of
deficiency; (3) petitioners are liable for an addition to tax under section
6651(a)(1); and (4) petitioners are liable for the 20% accuracy-related penalty
under section 6662(a). As explained below we find this case analogous to the
phrase ignorance is bliss, except when it is not.
1
Unless otherwise indicated, all section references are to the Internal
Revenue Code (Code) in effect at all relevant times, and all Rule references are to
the Tax Court Rules of Practice and Procedure. All dollar amounts are rounded to
the nearest dollar.
2
This penalty was added in an amended answer filed by respondent on
July 12, 2017, alleging it applies because there was an underpayment due to either
negligence or disregard of rules and regulations under sec. 6662(b)(1) or a
substantial understatement of income tax under sec. 6662(b)(2).
3
The Sonis conceded the $1,777,789 loss that was disallowed in the
statutory notice of deficiency (SNOD) issued March 12, 2015. In his answer to
petitioners’ amended petition, respondent asserted an alternative argument that if
we found the joint 2004 tax return was not a valid return, then the “statute of
limitations remains open with respect to petitioner Om Soni due to fraud on the
return.” Respondent later conceded this alternative argument on brief.
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[*3] FINDINGS OF FACT
Some facts have been stipulated and are so found. The stipulation of facts
and the attached exhibits are incorporated by this reference. Om and Anjali Soni
resided in New York when they timely filed their petition.
I. General Background
The Sonis married in India in 1978 in an arranged marriage traditional to
their culture. Shortly thereafter, Anjali moved to the United States from India to
be with her husband. They have lived together at their current family home in
New York since 1999. Their son Kunal Soni also lived in the home during the
year at issue.4
Om was an experienced businessman, and Anjali took care of the home at
all relevant times. Anjali viewed her marriage as traditional; she thought that her
husband would always take care of her. Throughout their marriage Om earned
most of the household income, but at least some of their passive income was
attributable to Anjali. However, Anjali was not aware that any assets or accounts
were held in her name or that she ever earned any income because she did not
work outside the home. She did not know how much her husband earned or what
4
For clarity in this opinion each of the Sonis will be referred to by first
name. Any references to “the Sonis” mean Om and Anjali Soni, a married couple.
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[*4] their monthly bills were. Instead, Om handled all financial affairs; he did not
discuss financial, business, or tax issues with Anjali.
The Sonis received mail at their home. Certified mail was delivered at the
door and regular mail was delivered into a mailbox outside their gate. The
housekeeper, Anjali, or other individuals who resided at their home would bring in
the mail once a day. Whoever brought in the mail would sort it. If Anjali brought
in the mail, she would typically just take out her magazines and other personal
mail for herself, leaving the remainder of the couple’s mail for Om. Om did not
review the couple’s mail; rather, he had it bundled and sent out to his office. His
administrative staff would further sort it and attend to items for the Sonis, even
those personal in nature.
II. Om Soni
Om earned master of science degrees in chemical engineering and
engineering sciences; he also held a master of business administration degree. He
worked in Fortune 500 companies before establishing several businesses of his
own. All of Om’s businesses included very large accounting and finance
departments. He expected the staff of those businesses to take care of both
business and personal matters, such as paying bills, preparation of income tax
returns, and sending gifts. He did not handle his own bank accounts or pay any of
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[*5] his personal bills for 25 years. He trusted his administrative staff to take care
of such personal matters.
Between 2004 and 2005 Om’s businesses acquired large debt loads.
Unfortunately, a subsequent market collapse created turmoil for his businesses.
One of his primary businesses declared bankruptcy in 2009, and by 2012 all of his
businesses had failed. Tax year 2012 was a trying year as Om was also indicted
for embezzling from his businesses’ section 401(k) plans. He was eventually
exonerated, but the litigation was time consuming and stressful for Om.
III. Anjali Soni
Anjali lived a traditional but affluent lifestyle and chose to remain
uninvolved with her family’s financial matters. In general she did not sign
documents, such as tax forms, for fear they might be something nefarious.5
Because her uncle had stolen from her Indian family in the past by forging her
father’s signature on legal documents, she remained leary of signing documents
and made it an ordeal to get her signature on any document.
5
Anjali did not sign documents because she was concerned that they might
be documents affecting her legal rights, for example, divorce papers. She also did
not like looking at legal documents or tax returns and would let them sit for days
without attention.
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[*6] However, Anjali was generally aware of U.S. tax return filing requirements.
She was aware that they were paying tax but did not want to interfere with matters
she perceived as her husband’s responsibility. Anjali chose to not take part in the
financial matters of the home, including tax matters. Since the time of their
marriage, Anjali has never signed a tax return or asked anyone to sign a tax return
for her. She did not pay attention to tax issues. Anjali fully expected and trusted
her husband to handle all financial affairs, including all the tax matters.
IV. Kunal Soni
The Sonis’ son Kunal was married, and he and his wife also resided at the
Sonis’ residence. Kunal worked for his father and helped him with many different
tasks. In particular Kunal discussed financial, legal, and tax matters with his
father. Om would often give documents to Kunal for Anjali to sign. Kunal trusted
his father, did not wish to engage with his mother for her signature, and therefore
signed for his mother out of convenience.
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[*7] Over time, he signed his mother’s name on six Forms 872, Consent to
Extend the Time to Assess Tax, applicable in this case.6 He also signed the 2009
through 2013 Federal income tax returns for his mother.
Kunal had a good relationship with his parents and tried to act in their best
interest. However, he never told his mother that he had signed any of the tax
documents; she in turn never asked about yearly taxes. Kunal, like his father, did
not discuss tax documents or other financial matters with his mother.
V. Tax Return Preparation
The Sonis’ 1999 through 2004 tax returns were prepared by an outside
accounting firm in coordination with Om’s businesses’ internal accounting
departments. The tax records and the returns were maintained by those accounting
departments. At each yearend, a controller from one of Om’s businesses and other
accounting staff compiled and reviewed business records and personal records.
They then gave the outside accountants the information needed to prepare the
Sonis’ personal returns. All returns were prepared selecting married filing jointly
6
Kunal signed his mother’s name on six of eight Forms 872, which
collectively extended the assessment period of limitations for the 2004 tax return
to December 31, 2015. Kunal also signed a Form 2848, Power of Attorney and
Declaration of Representative, appointing himself as representative for his parents
and signed that form on behalf of his mother on December 17, 2015. As discussed
infra p. 29, this was after a meeting with Alan Grossman, Kunal, Om, and
respondent’s counsel.
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[*8] status. Om inspected and signed the returns but failed to follow through to
see whether his wife had personally reviewed and signed them.
The 2004 tax return preparation and filing followed this protocol. In
particular for the 2004 tax return, Ralph Crisci from Ives & Sultan prepared the
return. Om’s staff compiled and transmitted information to Mr. Crisci for the
return with the exception of information related to the S corporation, Beauville
Corp. Om coordinated instead with Alan Grossman, a certified public accountant,
to provide that information. In 2004 the Sonis claimed a $1,777,789 loss
deduction from Beauville Corp. Mr. Crisci discussed the loss with Om and Mr.
Grossman prior to the return being filed. Mr. Crisci relied on representations from
them that there was sufficient basis for the loss deduction. Unknown to Mr.
Crisci, Om’s recordkeeping was poor, especially as it related to tracking his basis
in Beauville Corp.
The Sonis received two extensions of time to file their 2004 Form 1040,
U.S. Individual Income Tax Return. The extended due date was October 17, 2005,
because October 15, 2005, was a Saturday. See sec. 7503. Om signed the 2004
return on that date. Anjali’s signature is also dated October 17, 2005. The return
was mailed to the Internal Revenue Service (IRS) on November 10, 2005, and
received by the IRS on November 14, 2005.
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[*9] VI. The Sonis’ Authorized Representative
An examination of the 2004 return ensued. On March 20, 2008, during that
examination, the IRS received a Form 2848 authorizing Alan Grossman to act as
the Sonis’ representative. Through the year at issue and beyond, Mr. Grossman
assisted with income tax and employment tax matters for Om and his businesses.7
The Sonis’ and Mr. Grossman’s signatures on that Form 2848 were dated April 10,
2006. While a signature for Anjali was on Form 2848, Anjali did not personally
sign the Form 2848.
Later on December 17, 2015, Om signed a Form 2848 which authorized
Kunal to be his representative in addition to Mr. Grossman. Also on December
17, 2015, a Form 2848 authorizing Kunal to represent Anjali was received. Anjali
did not personally sign that Form 2848.
VII. Forms 872
Om became aware of an IRS examination of the 2004 tax return sometime
in 2006. In connection with that examination and the ensuing appeal to the IRS
7
Mr. Grossman was a certified public accountant with over 40 years of
experience. Om met Mr. Grossman through a family friend, Mr. Shah. Om had
previously provided funds to Mr. Shah and Mr. Shah’s mother, Dhadra, to keep
their businesses afloat. This included purchase money payments for the stock of
Beauville Corp., an S corporation sold to him by the Shahs. Om did not ask for
receipts or properly record the transactions with the Shahs.
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[*10] Office of Appeals,8 eight extensions to the period for assessment of tax were
executed on behalf of the Sonis with respect to the 2004 tax year. Seven of the
extensions were on Forms 872 and one was on Form 872-I, Consent to Extend the
Time to Assess Tax as Well as Tax Attributable to Items of a Partnership.9 The
process related to the signing of those extensions was as follows: In January 2008
Mr. Grossman called the revenue agent (RA) conducting the IRS examination
requesting that a Form 872 be sent to him. Because Mr. Grossman had no power
of attorney on file, a Form 872 was instead sent directly to the Sonis on March 11,
2008 (first extension). On March 20, 2008 the IRS received a copy of the first
extension signed by Mr. Grossman with a handwritten date of March 20, 2006,
and also received the fully executed Form 2848 naming Mr. Grossman as the
Sonis’ representative. The first extension was countersigned by the
Commissioner’s representatives on April 14, 2008. The RA then mailed a copy of
the fully executed first extension to the Sonis’ residence and a copy to Mr.
8
On July 1, 2019, Congress renamed the IRS Office of Appeals the IRS
Independent Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25,
sec. 1001(a), 133 Stat. at 983 (2019). The events in this case largely predate that
change, so we use the name in effect at the times relevant to this case, i.e., the
Office of Appeals.
9
No partnership-level or S corporation-level items are in dispute. The
question is whether the Sonis had sufficient basis in their S corporation stock in
Beauville Corp. to deduct a flowthrough loss from that entity for 2004.
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[*11] Grossman, as their representative. This first extension expanded the period
for assessment of tax to June 30, 2009.
Because IRS records listed Mr. Grossman as the Sonis’ representative, on
January 6, 2009, the RA sent him a Form 872-I to extend the Sonis’ 2004 period
for assessment of tax again (second extension). The RA sent the Sonis the same
form on January 7, 2009. On June 4, 2009, the RA received the second extension,
which expanded the period for assessment of tax to June 30, 2011. The second
extension was signed by Mr. Grossman as the Sonis’ representative; he also signed
both the Sonis’ names on the form. Again the Commissioner’s representatives
countersigned and on June 9, 2009, the RA sent a copy of the fully executed
second extension to the Sonis’ home address. After the second extension, there
were six additional Forms 87210 that extended the period of limitations for
assessment of tax to December 31, 2015. Om personally signed these additional
10
A third Form 872, received by the IRS on February 14, 2011, extended the
period for assessment of tax to June 30, 2012. A fourth Form 872, received on
March 6, 2012, extended the period to June 30, 2013. A fifth Form 872, received
on June 19, 2013, extended the period to June 30, 2014. A sixth Form 872,
received on January 29, 2014, extended the period to December 31, 2014. A
seventh Form 872, received on October 7, 2014, extended the period to June 30,
2015. An eighth and final Form 872, received on January 9, 2015, extended the
period to December 31, 2015. Each of these six additional Forms 872 was
countersigned by a representative of the Commissioner with an executed copy sent
to the Sonis’ home address.
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[*12] six Forms 872; Kunal signed for his mother. Neither Om nor Kunal ever
discussed any of the Forms 872 or 872-I with Anjali.
VIII. Notice of Deficiency and Tax Court Proceedings
The Commissioner issued the Sonis a SNOD on March 12, 2015. The only
noncomputational deficiency adjustment made was the disallowance of a
$1,777,789 flowthrough loss from Beauville Corp. deducted on the Sonis’ 2004
income tax return because the Sonis could not substantiate their basis in that
entity. Respondent also determined an addition to tax for late filing under section
6651(a)(1) of $28,836. The SNOD was also mailed to Mr. Grossman as the Sonis’
authorized representative. The petition was timely filed on June 15, 2015.
IX. Accuracy-Related Penalty
Respondent asserted a section 6662(a) penalty for the 2004 tax year in an
amendment to the answer lodged with the Court on July 12, 2017. The motion to
amend was granted by order dated August 9, 2017. Respondent’s counsel,
Christopher Davis, made the initial determination to assert a penalty pursuant to
section 6662(a) and (b)(1) and (2) for the Sonis’ 2004 tax year. On July 12, 2017,
Mr. Davis’ immediate supervisor Gerard Mackey personally approved the
determination in writing.
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[*13] OPINION
There are four questions before the Court: (1) whether the Sonis filed a
valid joint return for 2004; (2) whether the period of limitations for assessment of
tax expired before the issuance of the notice of deficiency; (3) whether the Sonis,
either or both of them, are liable for an addition to tax under section 6651(a)(1);
and (4) whether they are subject to a section 6662(a) penalty. We will take each in
turn.
I. Joint Return
A. Burden of Proof
As a general rule, the Commissioner’s determination of a taxpayer’s liability
is presumed correct, and the taxpayer bears the burden of proving that the
determination is incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933). In certain circumstances the burden of proof may shift to the
Commissioner where the “taxpayer introduces credible evidence with respect to
any factual issue relevant to ascertaining the liability of the taxpayer.” Sec.
7491(a)(1). Credible evidence is evidence that, upon critical analysis, would
constitute a sufficient basis for deciding the issue in favor of the taxpayer if no
contrary evidence were submitted. Higbee v. Commissioner, 116 T.C. 438, 442
(2001) (citing H.R. Conf. Rept. No. 105-599, at 240-241 (1998), 1998-3 C.B. 747,
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[*14] 994-995). The taxpayer bears the burden of proving that the requirements of
section 7491(a) have been met. Rolfs v. Commissioner, 135 T.C. 471, 483 (2010),
aff’d, 668 F.3d 888 (7th Cir. 2012).
Anjali did not sign the 2004 tax return. A spouse’s failure to sign the return
removes the presumption of correctness ordinarily attaching to the
Commissioner’s determination of jointness. O’Connor v. Commissioner, 412 F.2d
304, 309 (2d Cir. 1969), aff’g in part, rev’g in part and remanding T.C. Memo.
1967-174. Consequently, where a spouse does not sign a purported joint return,
the Commissioner bears the burden of producing evidence that a joint return was
intended. Id. Because Anjali did not sign, respondent bears the burden to show
that the return was filed jointly.
B. Tacit Consent
Because Anjali did not personally sign the return, we must determine
whether it was nonetheless filed jointly.11 Section 6013(a) permits a husband and
wife to file a joint return. Spouses who elect to file a joint return for a tax year are
required to compute their tax on the aggregate income of both spouses, and both
spouses are jointly and severally liable for all tax due. Sec. 6013(d)(3);
11
We note that if a joint return was not filed, Anjali did not otherwise file a
return for the 2004 tax year and the period of limitations for assessment for that
year would remain open indefinitely for Anjali. See sec. 6501(c)(3).
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[*15] Harrington v. Commissioner, T.C. Memo. 2012-285, at *4. Whether an
income tax return is a joint or separate return is a question of fact that depends on
the intent of the parties. Heim v. Commissioner, 27 T.C. 270, 273-274 (1956),
aff’d, 251 F.2d 44 (8th Cir. 1958). Consequently, married filing jointly status does
not apply to a return unless both spouses intended to make a joint return. See
Lane v. Commissioner, 26 T.C. 405, 408-409 (1956); Weber v. Commissioner,
T.C. Memo. 1995-125, 1995 WL 128456, at *3.
The failure of one spouse to actually sign does not necessarily negate the
intent to file a joint return by the nonsigning spouse. Estate of Campbell v.
Commissioner, 56 T.C. 1, 12 (1971); Hennen v. Commissioner, 35 T.C. 747, 748
(1961). Intent may be demonstrated through tacit consent; the “tacit consent rule”
holds that the intent to file jointly may be inferred from the acquiescence or tacit
approval from the nonsigning spouse. Hennen v. Commissioner, 35 T.C. at 748;
Okorogu v. Commissioner, T.C. Memo. 2017-53, at *19. This Court has
considered a variety of factors in deciding the issue of tacit consent, including
whether the nonsigning spouse filed a separate return, whether the nonsigning
spouse objected to filing jointly, and whether the prior filing history indicates the
intent to file jointly. Okorogu v. Commissioner, at *19-*21; see also Heim v.
Commissioner, 27 T.C. at 274; Howell v. Commissioner, 10 T.C. 859, 866 (1948),
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[*16] aff’d per curiam, 175 F.2d 240 (6th Cir. 1949); Carroro v. Commissioner, 29
B.T.A. 646, 650 (1933). Additionally, a pattern of relying on one’s spouse to
handle the family’s financial matters, including preparation of tax returns, suggests
that the spouse consented to the other spouse’s filing of the return. Estate of
Campbell v. Commissioner, 56 T.C. at 12-13; Okorogu v. Commissioner, at *20.
Overall, “[t]he tacit consent rule has been described as an extension of the
presumption of correctness that generally attaches to the Commissioner’s
determinations, specifically, a determination that a joint return was made despite
the fact that one spouse failed to sign the return.” Okorogu v. Commissioner,
at *20. Moreover, a joint return has been upheld where no part of the spouse’s
signature on the return was in the spouse’s handwriting. Estate of Campbell v.
Commissioner, 56 T.C. at 13.
The Sonis argue that the “tacit consent rule” should not apply in this case
because Anjali’s signature was signed by someone else, as opposed to the return’s
signature line being left blank. This is contrary to our holding in Estate of
Campbell. Id. Furthermore, the Sonis argue that the tacit consent rule does not
apply in this case because we must look to the facts and circumstances. We agree
that it is a facts and circumstances determination. See Heim v. Commissioner, 27
T.C. at 273-274.
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[*17] The Sonis have been married since 1978. Throughout their marriage, Om
took care of the family finances and Anjali handled the home matters. Anjali
enjoyed an affluent lifestyle and chose not to be involved in her family’s finances
or tax preparation. Consequently, Anjali believed and continues to believe it is her
role to trust her husband with the financial matters for the couple. Anjali stated
that “[w]e’ve been taught your husband always takes care of you. He does the
right thing, and you’ve got to trust him. My mother did that. My grandmother did
that. We all do that.” Therefore in her role with the family, Anjali did not discuss
financial matters including tax preparation because that was left up to her
husband.12
For tax years 1999 through 2003 the Sonis filed jointly. The record shows
that for tax years 2005 through at least 2014 they continued to file jointly. As of
the date of trial, the Sonis had not yet filed for tax years 2015 through 2017. The
2004 return was prepared and filed as a joint return. For all years the process for
12
Although she testified that she did not sign documents because long ago
her daughter warned her it could be a divorce paper, “so I don’t sign any papers,”
she went on to testify, when asked if she trusted her husband to handle all of the
tax issues: “I did. I do. I will.” Anjali continued to state that she trusted him
with handling the U.S. tax obligations, testifying: “I trust him with everything.
Yes, I do. I don’t know what this pertains, but whatever, right, wrong, I trust
him.” When asked a followup question regarding whether she agreed to his
dealing with the IRS, she stated: “We don’t talk about it, but whatever he does, I
do trust him. I never discuss his business with him.”
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[*18] preparing the returns was the same. The information for the returns was
gathered by the accounting departments of Om’s businesses and sent to an outside
accounting firm to prepare. All returns were then reviewed by personnel in Om’s
businesses before submission to him for filing. Om reviewed and signed all
returns. He generally asked his son or a staff member to get Anjali’s signature.
However, the record is unclear as to who signed the 2004 tax return for Anjali.
While Anjali did not personally sign the 2004 return, this was standard practice of
their tax return preparation. Consequently, Anjali chose to trust her husband’s
handling of their family’s finances, which included preparation and filing of their
tax returns, including the 2004 tax return.
But that is not the end of our inquiry; other factors this Court considers are
whether Anjali objected to filing jointly or made any attempts to file separately.
See, e.g., Heim v. Commissioner, 27 T.C. at 274; Howell v. Commissioner,
10 T.C. at 866; Carroro v. Commissioner, 29 B.T.A. at 650. Anjali had not taken
any affirmative actions, filed any separate returns, or made attempts to disavow the
joint status of the 2004 return before the date of trial. She had access to and
frequently brought in the family mail and would have seen bills, financial
accounts, and IRS notices in the mail. Many of those notices were addressed to
her or to her and her husband jointly. She was aware that they had a tax filing
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[*19] obligation in the United States; however, she testified that she did not
“really pay attention” to tax issues and felt she was “just out of the whole system.”
She chose to let other family members handle those issues. Anjali did not make
any attempts at filing separately from Om. She trusted Om to handle the tax
matters.
On balance, the evidence leads us to conclude that Anjali approved or at
least acquiesced in the joint filing of their 2004 return. Anjali did not discuss
financial matters with her husband or her son. She was generally aware of the
U.S. tax system but chose not to engage. Anjali relied on and continues to trust
her husband and son to handle the tax matters, including their Federal income tax
returns. Anjali was not interested in viewing the contents of the return; she
viewed it as her husband’s responsibility for the family.13 Anjali had the
opportunity to take affirmative steps upon receiving notices. However, she did not
take any affirmative steps in attempting to file separately or object to the 2004
return. Overall, Anjali repeatedly reiterated that she fully trusted her husband and
son to handle the financial issues for her. Anjali chose to let others handle all of
her affairs for her. It was part of her arrangement with her husband that he handle
13
She testified that she would let documents like tax returns sit “for days and
days and days. Because I don’t feel like reading papers like this, and I wouldn’t
look at it.”
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[*20] all of their tax-related matters. Therefore, she tacitly consented to filing the
2004 return jointly.
II. Period of Limitations for Assessment of Tax
Petitioners contend that the period of limitations for assessment of tax14
expired before the IRS mailed the SNOD. Ordinarily, the Commissioner must
assess a tax deficiency within three years of the date the return was filed. See
sec. 6501(a). The Commissioner must mail the SNOD before he may assess a
deficiency. See sec. 6213(a). If the Commissioner mails the SNOD, the period of
limitations for assessment is suspended. See sec. 6503(a)(1). Therefore, for the
SNOD to fall within the period of limitations for assessment, the Commissioner
had to mail it to the Sonis before the date that was three years after they filed their
2004 Federal income tax return. However, the period can be extended by a written
agreement before the expiration of that period. Sec. 6501(c)(4)(A).
14
The period of limitations also applies to additions to tax and penalties, and
any reference to the extension for assessment of tax deficiency also includes the
applicable additions to tax and penalties. Secs. 6501(a), 6651, 6662; see Leach v.
Commissioner, T.C. Memo. 1993-215, 1993 WL 166944, at *3 (showing the
application of sec. 6501 and sec. 6651(a)(1) addition to tax, noting that when a
taxpayer fails to file a return “the period of limitations does not bar assessment of
the deficiency and additions to tax”); see also Balice v. Commissioner, T.C.
Memo. 2009-196 (applying sec. 6662(a) penalty within the sec. 6501 period of
limitations for assessment).
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[*21] The Code treats married taxpayers who file jointly as one taxable unit;
however, it does not convert two spouses into one single taxpayer. Spouses filing
a joint return are separate taxpayers, and each spouse has an absolute right to
extend or not extend the time within which to assess. Dolan v. Commissioner, 44
T.C. 420, 427-428 (1965). A waiver to extend the period to assess a deficiency is
valid only as to the spouse who signs the waiver. Tallal v. Commissioner, 77 T.C.
1291, 1295 (1981).
The expiration of the period of limitations for assessment is an affirmative
defense, and the party raising it must specifically plead it and carry the burden of
proving its applicability. Rules 39, 142(a); Mecom v. Commissioner, 101 T.C.
374, 382 (1993), aff’d without published opinion, 40 F.3d 385 (5th Cir. 1994);
Heckman v. Commissioner, T.C. Memo. 2014-131, at *10-*11, aff’d, 788 F.3d
845 (8th Cir. 2015). To establish this defense, taxpayers must make a prima facie
case showing the date they filed their return, the expiration date of the period of
limitations based on that filing date, and receipt or mailing of the SNOD after the
running of that period. Coleman v. Commissioner, 94 T.C. 82, 89 (1990); Adler v.
Commissioner, 85 T.C. 535, 540 (1985); Robinson v. Commissioner, 57 T.C. 735,
737 (1972). The Sonis filed their 2004 return in 2005 and the SNOD was not
mailed until March 2015, which is past the period of limitations for assessment.
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[*22] Where the Commissioner has issued the SNOD to a taxpayer beyond the
three-year period, the burden of going forward is on respondent to show that the
taxpayer executed one or more written agreements extending the period of
limitations on assessment and that the SNOD was mailed before the end of the
extended period. See Hernandez v. Commissioner, T.C. Memo. 1998-46, 1998
WL 44090, at *4, supplemented by T.C. Memo. 1998-329. In this written
agreement between the Commissioner and the taxpayer both parties are agreeing
the limitations period will be extended. Sec. 6501(c)(4). If respondent can show a
facially valid extension existed, then the burden going forward shifts back to the
party pleading the affirmative defense to show that the alleged exception to the
expiration of the period is invalid or otherwise inapplicable. Adler v.
Commissioner, 85 T.C. at 540.
In the Sonis’ case the IRS received eight Forms 872 that were facially valid
and signed by either the Sonis or Mr. Grossman, whose power of attorney was on
file. The Forms 872 were each signed within the period of limitations for
assessing the deficiency, as extended, and would have extended the overall period
of limitations for assessment to December 31, 2015. The SNOD was sent in
March 2015. Respondent has met the burden showing that the SNOD was sent
within the extended period of limitations for assessment. Because the Sonis assert
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[*23] that the first two extensions were invalid, the burden shifts back to them to
prove that the extensions were in fact invalid.
A. First and Second Extensions and the Form 2848
An agreement to extend the period of limitations on assessment reached
under section 6501(c)(4) is a waiver of the limitations defense by the taxpayer; it
must be in writing. Piarulle v. Commissioner, 80 T.C. 1035, 1042 (1983). A
signed Form 872 embodies such a written waiver. The Sonis argue that the three-
year period of limitations for the assessment of tax bars assessment after
November 10, 2008, because the first two extensions, one on Form 872 and the
subsequent one on Form 872-I,15 were signed by Mr. Grossman without their
authorization. We now turn to whether this argument holds true.
1. Form 2848
The Sonis argue that Mr. Grossman did not have authority to agree to the
first extension because they had not signed the Form 2848 authorizing him to be
15
The consent to the extension of the three-year period is often made in
some version of the Form 872. Sec. 6501(c)(4); see sec. 601.105(f), Statement of
Procedural Rules. Form 872-I allowed for the extension of the period for
assessment of tax with respect to both partnership items and nonpartnership items.
Form 872-I (February 2005); see also Internal Revenue Manual (IRM)
pt. 4.31.2.6.3(3)(b) (Mar. 4, 2008). The IRM directed agents to use a Form 872-I
if “the examiner is uncertain as to the TEFRA status of any partnership in which
the taxpayer has invested”. IRM pt. 25.6.22.4.3(1) (Mar. 1, 2008). On October
30, 2009, Form 872-I became obsolete. IRM pt. 8.21.3.1.3.4 (Aug. 28, 2014).
- 24 -
[*24] their representative. Section 6064 provides that an individual’s name signed
on a document “shall be prima facie evidence for all purposes that the * * *
document was actually signed by him.” The Form 2848 authorizing Mr.
Grossman to act on the Sonis’ behalf looked facially valid, as it appeared they had
signed it. We now know Anjali did not personally sign Form 2848, but gave
implied consent for others to sign for her. Om likewise contends that the signature
on the Form 2848 was not his. To prevail on this point the Sonis must offer
evidence sufficient to overcome the presumption of authenticity that the Sonis’
signatures on the forms received by the IRS are correct and valid. See
Malachinski v. Commissioner, T.C. Memo. 1999-182, 1999 WL 349342, at *3-*4,
aff’d, 268 F.3d 497 (7th Cir. 2001); see also sec. 6064. The burden of proof is on
the Sonis to prove that the power of attorney was invalid. See Pleasanton Gravel
Co. v. Commissioner, 85 T.C. 839, 854 (1985); Lefebvre v. Commissioner, T.C.
Memo. 1984-202, aff’d, 758 F.2d 1340 (9th Cir. 1985).
On or about March 20, 2008, Mr. Grossman provided the Commissioner
with a Form 2848 authorizing him to act as the Sonis’ representative. He provided
the Form 2848 along with the first extension (i.e., the first Form 872). Although
the IRS received both forms on March 20, 2008, all signatures on the Form 2848
were dated April 10, 2006. The first extension, on the other hand, was dated
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[*25] March 20, 2006. IRS employee Rosalie Miller, who received the forms,
prepared handwritten notes indicating that “Rep-Grossman--executed/signed 872
using date of 3/20/06 [yet the] POA [power of attorney] was not valid until
4/10/06.” Appeals Officer Gerard Fitzgerald found that Mr. Grossman “actually
signed in 2008.” This finding is bolstered by the fact that the first extension form
was not prepared or provided to the Sonis until May 2007, making it impossible
for Mr. Grossman to have signed it in 2006. Om has not provided any supporting
evidence regarding the signatures, other than his testimony and Mr. Grossman’s
testimony. Mr Grossman could not remember whether he had had Om sign the
Form 2848 or had signed the Sonis’ names himself. He testified that if he had
signed the names of the Sonis, it was for expediency.16
While Om claims he did not sign the Form 2848, the Court does not simply
accept his unsubstantiated self-serving testimony.17 See Tokarski v.
16
Mr. Grossman testified that it was common practice for him to sign Forms
2848 for his clients. Mr. Grossman was often confused at trial, and we did not
find him to be a credible witness.
17
This Court did not find Om to be a credible witness. He testified that he
did not know that Anjali’s signature was not hers on 19 tax documents presented
at trial and that he never discussed the issue regarding the 2004 return with her.
He testified that Anjali did not have a foreign bank account until he was asked
whether he was “100 percent sure.” Then he immediately remembered detailed
information including that there was a Swedish account, that it had substantial loss
(continued...)
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[*26] Commissioner, 87 T.C. 74, 77 (1986) (concluding that the Court is not
required to accept uncorroborated or self-serving testimony as reliable and true).
“As a trier of fact, it is our duty to listen to the testimony, observe the demeanor of
the witnesses, weigh the evidence, and determine what we believe.” Kropp v.
Commissioner, T.C. Memo. 2000-148, 2000 WL 472840, at *3. Here, Mr.
Grossman did not remember whether he had signed the Form 2848 on behalf of
the Sonis; however, he did sign the Sonis’ names on the second Form 872 in
addition to his own. The signatures on the second Form 872 are markedly
different from those on the Form 2848, and Om’s signature on the Form 2848 is
similar to those he admits are his. We find that the Sonis did not meet their burden
of proof to show that Om did not sign the Form 2848.
We next delve into the question of whether Mr. Grossman should also be
considered Anjali’s representative and whether both Om and Anjali ratified that
representation.
2. Implied Authority and Ratification
Whether a representative has authority to act on behalf of a taxpayer is a
factual question to be decided according to the common law principles of agency.
17
(...continued)
amounts that the losses were incurred in a particular year.
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[*27] Trans World Travel v. Commissioner, T.C. Memo. 2001-6, 2001 WL 40099,
at *7; Estate of Quirk v. Commissioner, T.C. Memo. 1995-234, 1995 WL 325622,
at *5; see also Kraasch v. Commissioner, 70 T.C. 623, 627-629 (1978). Actual
authority is given by express statements, and implied authority is derived by
implication from the principal’s words or deeds. Dahl v. Commissioner, T.C.
Memo. 1995-179, 1995 WL 225567, at *3, aff’d, 85 F.3d 643 (11th Cir. 1996);
DiSanza v. Commissioner, T.C. Memo. 1993-142, 1993 WL 99971, at *9, aff’d, 9
F.3d 1538 (2d Cir. 1993). A taxpayer has a “duty to repudiate the consent as soon
as he learn[s] of it if he had not authorized it.” Lyon v. Commissioner, T.C.
Memo. 1994-351, 1994 WL 387151, at *4 (citing Mishawaka Props. Co. v.
Commissioner, 100 T.C. 353, 366 (1993), and 1 Restatement, Agency 2d, sec. 43
(1957)).
Om repeatedly indicated to representatives of the IRS that he wanted Mr.
Grossman to handle issues related to the Beauville Corp.’s loss deduction claimed
on the 2004 return. Anjali on the other hand allowed Mr. Grossman to act on her
behalf. Importantly, Mr. Grossman could not have mailed in the first extension of
the period of limitations for assessment of tax without the Sonis’ knowledge
because he did not receive a copy; rather, it was mailed directly to the Sonis at
their home address. The Commissioner’s records did not show Mr. Grossman held
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[*28] a POA until March 20, 2008, when the Form 2848 was received. Because
the RA could not verify that he was the Sonis’ representative, he did not send Mr.
Grossman the first extension; it was sent to the Sonis. The only possibility for Mr.
Grossman to have received the unexecuted first extension was for Om, Anjali, or
someone associated with them to have given it to him. He then signed it and
mailed it to the RA with a copy of the executed Form 2848. Thereafter, the IRS
sent copies of the countersigned first and second extensions to the Sonis’
residence. They would have been alerted that Mr. Grossman’s name and signature
were on the document. Neither of the Sonis tried to contact the RA or anyone
associated with the IRS to repudiate Mr. Grossman’s representation that he was
their authorized representative for signing the Forms 872, and they did not attempt
to correct the misperception, if any, that Mr. Grossman was their representative.
Furthermore, Om implied that Mr. Grossman was his representative by
treating him as such throughout this case.18 In January 2012 Om signed a protest
letter that Mr. Grossman drafted concerning the Sonis’ personal tax returns. In
April 2013 Mr. Grossman sent additional information regarding the Beauville
Corp. loss to the IRS on the Sonis’ behalf. On August 15, 2013, the IRS received
18
We note that Kunal was also added as a representative for Om and Anjali
in December 2015.
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[*29] a handwritten letter from Om attaching copies of two pieces of Mr.
Grossman’s prior correspondence to the IRS on the Sonis’ behalf (dated April 24
and August 7, 2013). Shortly after the petition was filed, Om, Kunal, and Mr.
Grossman met on December 9, 2015, with respondent’s counsel to discuss the
case.
On the eighth and last Form 872, which Om signed, he named Mr.
Grossman as the Sonis’ representative. The Sonis never questioned any of the
activities performed by Mr. Grossman on their behalf. To only now state that he
was not their representative is beyond the pale.
Om consistently acted as if Mr. Grossman was the Sonis’ representative
regarding the 2004 tax year. Om continued to work with Mr. Grossman
throughout the audit process and treated Mr. Grossman as his representative.
Therefore, even if the Sonis did not personally sign the Form 2848 they gave
implied authority to Mr. Grossman.
As for Anjali, as discussed supra pp. 14-20, Anjali gave her husband tacit
consent to take care of the tax matters, and we might be able to rely on that
authority to conclude Om authorized Mr. Grossman’s representation for Anjali.
However, Anjali’s actions likewise ratified the representation. See Shopsin v.
Commissioner, T.C. Memo. 1984-151, 1984 Tax Ct. Memo LEXIS 522,
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[*30] at *12-*13 (finding that the taxpayers’ “actions, and in some instances their
inaction, effectuated a ratification”), aff’d without published opinion, 751 F.2d
371 (1984). She too remained silent and allowed the IRS the rightful perception
that Mr. Grossman was an authorized representative of the Sonis acting on both
their behalves.
The Sonis additionally argue that Mr. Grossman forged their signatures.
Generally, raising an issue long after a supposed forgery is evidence in the
Commissioner’s favor. See Malachinski v. Commissioner, 1999 WL 349342,
at *3-*6. Furthermore, if a taxpayer would have ratified the powers of attorney if
requested to do so or would have signed new powers of attorney, this Court does
not view the signature as a forgery. Slawek v. Commissioner, T.C. Memo. 1987-
438, 1987 Tax Ct. Memo LEXIS 435, at *13-*15. Further, an extension request
which is itself defective may also be ratified by subsequent actions of a taxpayer.
Ryan v. Commissioner, T.C. Memo. 1991-49, 1991 Tax Ct. Memo LEXIS 68,
at *12. This Court has long held that by allowing an individual to present himself
before the IRS as the taxpayer’s representative, the taxpayer is approving the
action and adopting the powers of attorney as his own. See Slawek v.
Commissioner, 1987 Tax Ct. Memo LEXIS 435, at *14-*15. A taxpayer must act
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[*31] because the IRS is forced to rely on apparently valid powers of attorney and
in so doing acts to its detriment. Id. at *15.
The Sonis treated Mr. Grossman as their representative throughout the
appeal and litigation process, and they did not contest the first two Forms 872
until well over a decade later. Om acted as if Mr. Grossman was his authorized
representative, and Anjali provided her tacit consent for Om to act on her behalf.
Because Om authorized Mr. Grossman’s representation, Anjali also tacitly
consented, through Om’s agency. The Sonis therefore ratified the Forms 2848,
making the subsequently signed extension requests valid.
3. First Extension Dated “3/20/06”
Lastly, the Sonis argue that even if the Form 2848 is valid, the date on the
first extension makes that extension invalid. On the first extension the date next to
Mr. Grossman’s signature appears to be March 20, 2006. They propose that Mr.
Grossman did not have authority as of March 20, 2006, because the Form 2848
was signed afterward, on April 10, 2006. Because the first extension was prepared
and mailed to the Sonis on May 16, 2007, it was factually impossible for Mr.
Grossman to have signed it in 2006. It is apparent that Mr. Grossman mistakenly
dated his signature on the first extension as March 20, 2006, when he meant
March 20, 2008, which is the date the first extension was provided to the RA.
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[*32] Because of this scrivener’s error in the dated signature, the Sonis argue that
the Commissioner was on notice that there was an issue with the first extension.
They point to notes written by IRS employee Rosalie Miller that identified the
timing issue. We do not find this argument persuasive. We find that the March
20, 2006, date was a scrivener’s error and therefore the extension was still valid.
Furthermore, the Sonis’ actions demonstrate that they ratified the Form
2848, first extension, and second extension. As discussed supra pp. 26-31,
taxpayers may ratify by acting as if the Form 2848 or the Form 872 were
authorized, or by not taking actions to correct the mistakes as they were presented
to them.
In this case the record reflects the Sonis’ overt actions of treating Mr.
Grossman as their representative for extending the period of limitations for
assessment of tax on multiple occasions. Om and Kunal signed an additional six
Forms 872 with the express purpose of extending the period of limitations for the
2004 return, and the Commissioner relied on those seemingly valid extensions to
his detriment.
4. Om’s Implied Authority To Act on Behalf of Anjali
As discussed supra pp. 26-31 a taxpayer may give an individual implied or
express authority to act on his or her behalf. The Sonis also argue that the Form
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[*33] 2848 and Form 872 are invalid as to Anjali. Anjali repeatedly stated that she
trusted her husband to handle the financial matters, which included the tax
matters. As part of their relationship Anjali choose to give her husband the
authority to handle those tax matters, which included signing the Forms 872. She
said she would continue to trust Om with the tax matters going forward. While
Anjali may not have expressly given her husband authority to sign specific forms,
it was well understood that Anjali gave him the implied authority to act on her
behalf.
Furthermore, she may not sit idly by; she had a duty to address items as they
become known to her. See Lyon v. Commissioner, 1994 WL 387151, at *4.
Anjali handled the household mail, which would have included correspondence
from the IRS in her name. She would have received the copies of the fully
executed Forms 872 sent to her address in her name. She chose to ignore tax
matters even when items were addressed to her in the mail. In addition this Court
has found that where an individual, in this case Om, had implicit authority to sign
for a taxpayer and the taxpayer did not contest or otherwise alert the IRS to the
lack of authority in a timely manner, the taxpayer has ratified that authority. See
Shopsin v. Commissioner, 1984 Tax Ct. Memo LEXIS 522, at *21-*22 (finding
that the taxpayers’ accountant acted within the scope of his employment by
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[*34] signing a petition and acted as the authorized agent in filing that petition).
In Shopsin we found that a husband implicitly authorized his wife to sign his name
on a Form 2848 and several other documents and that he ratified that authority by
not raising the limitations issue until several weeks after he sought to invalidate
his signature on a stipulated decision that he did in fact sign. Id. Similarly here,
we find that Anjali gave implicit authority to her husband to act on her behalf in
ratifying the Form 2848 that gave Mr. Grossman authority to act as her
representative. She also personally ratified any actions of Mr. Grossman by not
timely addressing the limitations issue anytime before trial.
B. Conclusion on Extending the Period of Limitations for Assessment of
Tax
The Sonis did not meet their burden of proof under Rules 39 and 142(a).
Om signed the Form 2848 authorizing Mr. Grossman to be his representative, gave
implied authority for Mr. Grossman to act on both the Sonis’ behalf, and ratified
Mr. Grossman’s authority as their authorized representative. Om knew that Mr.
Grossman was acting on his behalf. Therefore, Om may not now claim that the
Forms 872 are invalid.
Anjali relied on her husband to handle financial and tax matters. Om then
gave authority to Mr. Grossman to act as the representative for him and Anjali.
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[*35] Neither of the Sonis challenged Mr. Grossman’s authority until almost a
decade after they were aware of Mr. Grossman’s acting on their behalf. The eight
executed Forms 872 properly extended the period of limitations for assessment
and therefore the period of limitations did not expire before the issuance of the
SNOD.
III. Section 6651(a)(1) Addition to Tax
The Sonis argue that they should not be liable for the addition to tax under
section 6651(a)(1) because they thought they did not owe any tax.19 Section
6651(a)(1) imposes an addition to tax for a taxpayer’s failure to file a required
Federal income tax return on or before the specified filing date, including
extensions. Respondent bears the burden of production with respect to any
addition to tax, sec. 7491(c), and may satisfy this burden of production by
demonstrating that the tax return was filed after its due date, Wheeler v.
Commissioner, 127 T.C. 200, 207-208 (2006), aff’d, 521 F.3d 1289 (10th Cir.
2008); Higbee v. Commissioner, 116 T.C. at 447. Here, the record reflects that the
19
The Sonis also argue that Anjali would not be subject to the sec.
6651(a)(1) addition to tax because she had no filing responsibility for the 2004 tax
year. The record does not establish whether Anjali did or did not have a filing
responsibility for 2004. Therefore, we could not determine that she did not.
Regardless, Anjali and Om jointly filed the 2004 return and therefore both are
responsible for the addition to tax. See Okorogu v. Commissioner, T.C. Memo.
2017-53, at *14-*16.
- 36 -
[*36] Sonis received extensions of time pursuant to section 6081 allowing them to
file their 2004 tax return on or before October 17, 2005. The Sonis mailed their
return on November 10, 2005. Thus, respondent met his burden of production in
this case, and the burden is now on the Sonis to prove that an exception to the
section 6651(a)(1) addition to tax applies.
The application of the section 6651(a)(1) addition to tax may be avoided if
the taxpayer shows that the failure to timely file was due to reasonable cause and
not due to willful neglect. Sec. 301.6651-1(c)(1), Proced. & Admin. Regs.
Reasonable cause exists if the taxpayer exercised ordinary business care and
prudence but nevertheless could not file. Id. The burden of showing reasonable
cause under section 6651(a)(1) remains with the Sonis. See Higbee v.
Commissioner, 116 T.C. at 447.
Reasonable cause for delay is established where a taxpayer is unable to file
despite the exercise of ordinary business care and prudence. Bassett v.
Commissioner, 67 F.3d 29, 31 (2d Cir. 1995), aff’g 100 T.C. 650 (1993); sec.
301.6651-1(c)(1), Proced. & Admin. Regs. “Willful neglect” has been defined as
a “conscious, intentional failure or reckless indifference.” United States v. Boyle,
469 U.S. 241, 245 (1985). Whether a failure to file timely is due to reasonable
- 37 -
[*37] cause and not willful neglect is a question of fact. Id. at 249 n.8; Crocker v.
Commissioner, 92 T.C. 899, 913 (1989).
The Sonis did not have a reasonable explanation for filing late. They
thought no harm no foul because they would have zero tax due, but this is not a
reasonable cause for the delay. Consequently, no reasonable cause exists.
See, e.g., Frey v. Commissioner, T.C. Memo. 2019-62. We therefore conclude
that the Sonis are liable for the addition to tax under section 6651(a)(1).
IV. Section 6662(a) Accuracy-Related Penalty20
Respondent determined a penalty under section 6662(a) and (b)(1) or (2) for
the 2004 tax year in an amendment to his answer lodged with the Court on July 12,
2017. The amendment was authorized by the Court on August 9, 2017.
Respondent bears the burden of production with respect to an individual
taxpayer’s liability for any penalty and the burden of proof with respect to any new
penalty pleaded in his answer. See sec. 7491(c); Rule 142(a)(1). Furthermore,
section 6751(b)(1) requires written supervisory approval of a “penalty
determination no later than the date the IRS issues the notice of deficiency (or files
20
Again the Sonis argue that Anjali did not have a filing requirement and
therefore is not subject to any penalty. As discussed supra note 19, nothing in the
record supports or refutes Anjali’s having a filing requirement. Consequently, we
are not obliged to address this argument.
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[*38] an answer or amended answer) asserting such penalty.” Chai v.
Commissioner, 851 F.3d 190, 221 (2d Cir. 2017), aff’g in part, rev’g in part T.C.
Memo. 2015-42. The record reflects and petitioners concede that respondent’s
employee secured timely supervisory approval for the penalty.21
Section 6662(a) imposes an accuracy-related penalty equal to 20% of the
portion of an underpayment of tax required to be shown on a return that is
attributable to either negligence or disregard of the rules or regulations under
section 6662(b)(1) or a substantial understatement of income tax under section
6662(b)(2). Section 6662(c) defines “negligence” to include any failure to make a
reasonable attempt to comply with tax laws, and section 1.6662-3(b)(1), Income
Tax Regs., includes any failure to keep adequate books and records or to
substantiate items properly. An understatement of income tax is substantial if it
exceeds the greater of 10% of the tax required to be shown on the return or
$5,000. Sec. 6662(d)(1)(A). Here, the Sonis did not keep adequate records and
conceded the underlying tax; their tax understatement was substantial.
However, this section 6662(a) accuracy-related penalty does not apply if the
taxpayers show they acted with reasonable cause and in good faith in filing their
21
The requirements of sec. 6751(b) were satisfied and have not been
challenged by petitioners.
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[*39] return. Sec. 6664(c)(1). This reasonableness analysis takes into account the
taxpayers’ experience, knowledge, and education. Sec. 1.6664-4(b)(1), Income
Tax Regs. Reasonable reliance upon the advice of a tax professional may also
establish reasonable cause and good faith. Id. para. (c). The Sonis allege that they
relied on their accountants Mr. Crisci and Mr. Grossman to file a correct return.
To show reliance on an adviser, a taxpayer must prove that: (1) the adviser
was a competent professional who had sufficient expertise to justify reliance,
(2) the taxpayer gave the adviser the necessary and accurate information, and
(3) the taxpayer actually relied in good faith on the adviser’s judgment.
Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 99 (2000), aff’d, 299
F.3d 221 (3d Cir. 2002).
The Sonis failed to show reliance on an adviser because they failed to
provide Mr. Crisci or Mr. Grossman necessary and accurate information. The
Sonis suggest that because Om delegated most tasks, he should not be held
responsible for the misstatement.
Om is a highly educated businessman. The Sonis claimed a $1,777,789 loss
deduction from Beauville Corp. on their 2004 Federal income tax return. Om was
aware that he should have kept records of the Beauville Corp. and admitted that he
did not keep proper records of this transaction. In correspondence with
- 40 -
[*40] respondent Om indicated that the Beauville Corp. transactions were “based
on trust and not properly documented the way a normal business transaction would
be.” No documents were produced at trial. Mr. Crisci, Om’s outside tax preparer,
had asked the Sonis to provide the information relating to Beauville Corp. The
Sonis worked with Mr. Grossman to provide what information they could to Mr.
Crisci. However, the Sonis may not use Mr. Grossman or Mr. Crisci as a shield
for their failure to keep proper records. Their actions were not reasonable or in
good faith. Therefore, the Sonis were negligent because they failed to keep proper
records. They also substantially understated their income tax. We accordingly
conclude the Sonis are liable for the section 6662(a) penalty.
V. Conclusion
We conclude that the Sonis filed a valid joint return, the period of
limitations under section 6501(a) and (c)(4) did not expire before the issuance of
the SNOD, the Sonis owe the addition to tax under section 6651(a)(1), and they
owe a 20% accuracy-related penalty under section 6662(a).
In reaching our decision we have considered all arguments made by the
parties, and to the extent not mentioned or addressed, they are irrelevant, moot, or
without merit.
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[*41] To reflect the foregoing,
Decision will be entered for
respondent.