- 6 -
that the Commissioner's determination is incorrect.2 Rule
142(a); Welch v. Helvering, 290 U.S. 111 (1933).
Petitioners rely on Portillo v. Commissioner, 932 F.2d 1128
(5th Cir. 1991), affg. in part and revg. in part T.C. Memo. 1990-
68, which held that the Commissioner had a duty to investigate
the "bald assertion" contained in a Form 1099 received from a
third party to confirm whether it was supported by other
financial records, and the Commissioner's failure to do so
rendered the notice of deficiency arbitrary and erroneous. Id.
at 1134. The Court of Appeals for the Fifth Circuit, however,
has narrowed the holding in Portillo by declining to apply it
where the Commissioner does not rely on a statement of a third
party to determine that a deficiency exists. See Woodall v.
Commissioner, 964 F.2d 361, 363 (5th Cir. 1992), affg. T.C. Memo.
1991-15. In the instant case, respondent based the determination
in the notice of deficiency on petitioners' agreement in the New
York consent form to an increase in their New York State income
for 1995. See Sealy Power, Ltd. v. Commissioner, 46 F.3d 382,
386 (5th Cir. 1995), affg. in part, revg. in part on other
grounds, and remanding in part T.C. Memo. 1992-168.
2 Internal Revenue Service Restructuring & Reform Act of
1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726-
727, added sec. 7491, which places the burden of proof on the
Commissioner in certain circumstances. Sec. 7491 is applicable
to court proceedings arising in connection with examinations
commencing after July 22, 1998. See RRA 1998 sec. 3001(c), 112
Stat. 727; Higbee v. Commissioner, 116 T.C. 438, 440 (2001). The
examination in the instant case commenced on Nov. 12, 1997.
Accordingly, sec. 7491 is inapplicable.
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