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was attributable as an ordinary and necessary expense, or as
payment to protect such business.”3
Section 7491 does not define what constitutes credible
evidence. The pertinent legislative history states: “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).”
H. Conf. Rept. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-
995; see Higbee v. Commissioner, 116 T.C. 438, 442 (2001).
The only evidence regarding the nature of petitioners’
business activities consists of petitioner’s summary and
uncorroborated testimony. He testified, with little elaboration,
that he has been a building contractor and land developer for
about 30 years, during which time he has developed about one
project a year. On cross-examination, he testified that his
construction and real-estate development businesses are not
separate businesses, but are “all tied together. They’re all–-
any business I have is–-if I–-if they are–-oftentimes I
incorporate, because of the liability aspect. They are
Subchapter S if they are.”
3 Respondent does not contend that petitioners fail to
satisfy other requirements of sec. 7491(a)(2).
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