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Further, the conference report explains the purpose of the
limitations set forth in section 7491(a)(2):
Nothing in the provision shall be construed to
override any requirement under the Code or regulations
to substantiate any item. Accordingly, taxpayers must
meet applicable substantiation requirements, whether
generally imposed10 or imposed with respect to specific
items, such as charitable contributions or meals,
entertainment, travel, and certain other expenses.
Substantiation requirements include any requirement of
the Code or regulations that the taxpayer establish an
item to the satisfaction of the Secretary. Taxpayers
who fail to substantiate any item in accordance with
the legal requirement of substantiation will not have
satisfied the legal conditions that are prerequisite to
claiming the item on the taxpayer’s tax return and will
accordingly be unable to avail themselves of this
provision regarding the burden of proof. Thus, if a
taxpayer required to substantiate an item fails to do
so in the manner required (or destroys the
substantiation), this burden of proof provision is
inapplicable.
* * * * * * *
10See e.g., Sec. 6001 and Treas. Reg. sec. 1.6001-
1 requiring every person liable for any tax imposed by
this Title to keep such records as the Secretary may
from time to time prescribe, * * *.
[Id. at 241, 1998-3 C.B. at 995; certain fn. refs.
omitted.]
Petitioners’ evidence does not meet the requirements of
section 7491(a). Besides the fact that the form document
entitled “Small Claims Complaint/Summons/Answer” does not
actually indicate whether litigation in small claims court was
commenced or completed, the document itself does not qualify as a
competent appraisal or reliable estimate of the cost of any
repairs. Because petitioners have failed to provide credible
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