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Taxpayers generally bear the burden of proving that the
Commissioner’s determination is incorrect. Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933). Section 7491(a)(1) provides,
however, that the burden of proof shifts to the Commissioner if,
among other requirements, the taxpayer introduces “credible
evidence with respect to any factual issue relevant to
ascertaining” his liability for the tax deficiency at issue. The
Court concludes that section 7491 has no effect on the resolution
of the section 1362 election issue and does not shift the burden
of proof to respondent because petitioners have failed to comply
with the requirements of section 7491(a)(2).
Election Under Section 1362
Petitioners seem to have all but abandoned the original
position taken on their personal returns for 1997 and 1998.
Their argument that the corporation was an S corporation is now
merely a "backup" to their argument that they operated as a
proprietorship in 1997 and 1998. The issue, nevertheless, will
be addressed.
Petitioners have offered as evidence to show that they filed
a proper election, a copy of a Form 2553 signed by Suzanne Higbee
on July 10, 1995, and testimony of Martin Higbee that he mailed
the Form 2553 at the same time and in the same envelope as a Form
SS-4, sometime in 1996. Although there was no evidence or
argument offered by the parties on the issue, the Court is left
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