Estate of Melvin W. Ballantyne, Deceased, Jean S. Ballantyne, Independent Executrix, and Jean S. Ballantyne - Page 15

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          1994 and 1995 because they relied in good faith on the advice of            
          their accountant.14                                                         
               The estate argues that all grain sales income is                       
          attributable to Russell because he was entitled to receive all              
          the farm income as his distributive share of BBP income.15  In              
          its reply brief, the estate for the first time joins respondent’s           
          alternative argument that the grain was the sole property of                

               14On brief, Russell and Clarice argue that sec. 7491 applies           
          and that respondent has the burden of proof with respect to the             
          issues for decision.  In certain circumstances, if the taxpayer             
          introduces credible evidence with respect to any factual issue              
          relevant to ascertaining the proper tax liability, sec. 7491                
          places the burden of proof on respondent.  Sec. 7491(a); Rule               
          142(a)(2).  Sec. 7491(c) operates to place the burden of                    
          production on respondent in any court proceeding with respect to            
          the liability of the taxpayer for penalties and additions to tax.           
          Sec. 7491 is effective with respect to court proceedings arising            
          in connection with examinations commencing after July 22, 1998.             
          Internal Revenue Service Restructuring and Reform Act of 1998,              
          Pub. L. 105-206, sec. 3001(c), 112 Stat. 727.  Russell and                  
          Clarice have introduced no evidence to establish whether the                
          examination in this case commenced after July 22, 1998, and,                
          consequently, they have failed to show that sec. 7491 applies.              
          Eddie Cordes, Inc. v. Commissioner, T.C. Memo. 2001-265.  We note           
          that the evidence that is in the record establishes that the                
          examination of the estate, as well as an examination of BBP,                
          began before July 23, 1998.                                                 
               15We note that the estate, in arguing that Melvin’s and                
          Russell’s distributive shares were the profits from the                     
          respective activity each conducted, has not discussed the fact              
          that this finding would mean that the estate should have reported           
          100 percent of the income from the oil and gas activity instead             
          of only 50 percent of the income.  It appears that the estate is            
          arguing that it should be liable for only 50 percent of the                 
          income from the oil and gas activity and no portion of the income           
          from the farming activity.  This conflicts with the estate’s                
          primary argument that its distributive share was the profits from           
          the oil and gas activity.                                                   

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