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the Castros’ jointly filed Form 1040 for 1996.8 In respondent’s
notice of deficiency to the Castros, respondent increased their
income by the jewelry business’ adjusted net profit and decreased
their income by the fiduciary fees received.
OPINION
I. Burden of Proof
Petitioners contend that petitioner’s testimony was
uncontroverted and credible and that, pursuant to section 7491,
the burden of proof has shifted to respondent. Respondent
contends that the only issue for decision is which petitioner is
properly taxable on the net income generated by the jewelry
business and that petitioners have the burden of proof on that
issue.
Generally, the burden of proof is on the taxpayer to show
that the Commissioner’s determinations are erroneous. See Rule
142(a). The Internal Revenue Service Restructuring & Reform Act
of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, however,
added section 7491, which is applicable to court proceedings
arising in connection with examinations commenced after July 22,
1998. Under section 7491(a)(1), the burden of proof shifts to
8Although the parties stipulated that the Castros’ tax
return for 1996 was in evidence, the exhibit attached to the
stipulation of facts was a copy of the Castros’ 1995 return. Our
factual findings regarding the Castros’ 1996 returns are based on
respondent’s notice of deficiency and the Castros’ 1995 tax
return.
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