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Conclusion
Petitioners have not shown that respondent’s agents violated
section 7602(c).
Statutory Limitation on Financial Status Audits
Citing various background questions that Leary asked Carol
at their initial meeting on July 16, 1998, petitioners contend
that on or about that date respondent used a financial status or
economic reality examination technique in violation of section
7602(e).8
Section 7602(e) became effective on the date of enactment of
RRA 1998; i.e., July 22, 1998. H. Conf. Rept. 105-599, at 270
(1998), 1998-3 C.B. 755, 1024. Petitioners do not contend that
any actions taken by respondent’s agents on or after July 22,
1998, violated section 7602(e). Accordingly, section 7602(e) has
no application to this case.
Burden of Proof
Petitioners contend that respondent bears the burden of
proof pursuant to section 7491. Respondent contends that section
7491 is inapplicable. We agree with respondent.
8 Sec. 7602(e), as added by Internal Revenue Service
Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3412,
112 Stat. 751, provides:
(e) Limitation on Examination of Unreported
Income.--The Secretary shall not use financial status
or economic reality examination techniques to determine
the existence of unreported income of any taxpayer
unless the Secretary has a reasonable indication that
there is a likelihood of such unreported income.
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