## Facts

- The Commissioner determined a 1980 income tax deficiency and additions to tax for late filing under I.R.C. § 6651(a) and negligence under I.R.C. § 6653(a).
- The taxpayer and his wife filed a joint 1980 return after the due date; the wife was not a party to the case.
- After a work-related transfer, the taxpayer moved to South Carolina; his wife returned to Baltimore with their children.
- During a Labor Day weekend visit to Baltimore, the taxpayer discovered another man living in the marital residence and encountered a late-night gathering at the home.
- On September 2, 1980, after a quarrel in which his wife left the house, the taxpayer placed some of his wife’s clothes on the stove and intentionally set them on fire.
- The taxpayer claimed he attempted to extinguish the fire and then left, but the fire spread and ultimately destroyed the residence.
- The taxpayer’s insurer denied his claim; he then claimed a casualty-loss deduction on his 1980 return for the fire loss.
- The Commissioner disallowed the casualty-loss deduction and asserted the additions to tax.

## Issues

1. Whether I.R.C. § 165(c)(3) allows a casualty-loss deduction for a residence destroyed by a fire intentionally started by the taxpayer, even if the taxpayer claims he believed the fire was out.
2. Whether the taxpayer proved “reasonable cause” for late filing sufficient to avoid the addition to tax under I.R.C. § 6651(a).
3. Whether the underpayment was due to negligence or intentional disregard of rules or regulations under I.R.C. § 6653(a).

## Decision

- The court held the taxpayer was not entitled to a casualty-loss deduction under § 165(c)(3) because the loss resulted from a fire he intentionally set.
- The court sustained the § 6651(a) addition to tax because the taxpayer did not prove reasonable cause for filing late.
- The court rejected the § 6653(a) negligence addition, finding the taxpayer had a reasoned basis for claiming the casualty-loss deduction even though it was ultimately disallowed.

## Legal Principles

- A § 165(c)(3) casualty-loss deduction is subject to public-policy limitations; deductions may be denied when allowance would frustrate sharply defined state or national policies.
- A loss is not deductible as a “casualty” under § 165(c)(3) when it is self-inflicted through the taxpayer’s intentional misconduct that causes the destructive event.
- For § 6651(a), the taxpayer bears the burden to show failure to file timely was due to reasonable cause and not willful neglect; unsupported explanations do not satisfy this burden.
- For § 6653(a), negligence requires a lack of due care or disregard of rules; asserting a position that is debatable in law may avoid the negligence addition even if the position fails.

## Conclusion

The Tax Court denied a casualty-loss deduction for a residence destroyed by a fire the taxpayer intentionally started on public-policy grounds, sustained the late-filing addition for lack of reasonable cause, and declined to impose the negligence addition because the taxpayer had a plausible basis for claiming the deduction.


Blackman v. Commissioner, 88 T.C. 677 (1987)