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(a) Has complied with substantiation requirements under the
Internal Revenue Code. See sec. 7491(a)(2)(A). Respondent
concedes that petitioners meet this requirement;
(b) has maintained all records required by the Internal
Revenue Code and has cooperated with reasonable requests by the
Secretary for information, documents, meetings, etc. See sec.
7491(a)(2)(B). Respondent concedes that petitioners meet this
requirement;
(c) introduces, in a court proceeding, credible evidence
with respect to any factual issue relevant to ascertaining the
liability of the taxpayer for any tax imposed under subtitle A or
B. See sec. 7491(a)(1). Respondent disputes whether petitioners
meet this requirement.
In its report for the RRA 1998, the Senate Finance Committee
explained the burden of proof provision as follows:
The burden will shift to the Secretary under this
provision only if the taxpayer first introduces
credible evidence with respect to a factual issue
relevant to ascertaining the taxpayer's income tax
liability. Credible evidence is the quality of
evidence which, after critical analysis, the court
would find sufficient upon which to base a decision on
the issue if no contrary evidence were submitted
(without regard to the judicial presumption of IRS
correctness). A taxpayer has not produced credible
evidence for these purposes if the taxpayer merely
makes implausible factual assertions, frivolous claims,
or tax protestor-type arguments. The introduction of
evidence will not meet this standard if the court is
not convinced that it is worthy of belief. If after
evidence from both sides, the court believes that the
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