- 16 - their deduction to interest on $1.1 million indebtedness based on advice from an accountant. In her notice of deficiency, respondent completely disallowed petitioners' Schedule A deduction for home mortgage interest. As a result of the October 31, 1995, meeting with petitioner, Clement allowed the Paus a home mortgage interest deduction, but he limited the allowable deduction to the interest on $1 million indebtedness. Consequently, he calculated that the allowable deduction is $99,040 rather than the $107,226 claimed by petitioners, a difference of $8,186. Clement also increased the Schedule A deduction for personal interest by $819, from $4,210 to $5,029. OPINION As a general rule, the Commissioner's determinations are presumed correct, and taxpayers bear the burden of proving that those determinations are erroneous. Accordingly, with respect to deficiencies flowing from the home mortgage interest deduction and the $840,000 omission, petitioners have the burden of proof. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). Since the $150,000 omission was asserted by respondent after the notice of deficiency was mailed, it is new matter on which respondent bears the burden. Rule 142(a). Respondent also bears the burden of proving, by clear and convincing evidence, that petitioners are liable for the civil fraud penalty. Sec. 7454(a); Rule 142(b). Issue 1. Penalty Pursuant to Section 6663Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
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