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Section 7491(a) places the burden of proof on the
Commissioner as to any issue upon which the taxpayer introduces
credible evidence and which is relevant to the taxpayer’s tax
liability. However, for the burden of proof to be placed on the
Commissioner, the taxpayer must comply with the substantiation
and record-keeping requirements of the Internal Revenue Code.
Moreover, section 7491(a) requires that the taxpayer cooperate
with reasonable requests for “witnesses, information, documents,
meetings, and interviews”. Sec. 7491(a)(2)(B).
The notice of deficiency, upon which this case is based,
states with respect to the expenses claimed: “We are not
allowing the amount on your return because we did not get an
answer to our request for information to support your entries.”
Petitioners failed to cooperate with reasonable requests by
respondent for documents as required by section 7491(a)(2)(B).
On the record, the Court has denied petitioners’ motion.
The first issue is whether petitioners are entitled to
deductions under section 162(a) for expenses which they claim
petitioner incurred in a real estate trade or business activity
for profit.
Section 162(a) allows a deduction for all ordinary and
necessary expenses incurred in carrying on a trade or business.
Section 212 allows a deduction for all ordinary and necessary
expenses paid or incurred for the production of income.
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Last modified: November 10, 2007