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Internal Revenue Code, the taxpayer is required to maintain
records that are sufficient to enable the Commissioner to
determine the correct tax liability. See sec. 6001; sec. 1.6001-
1(a), Income Tax Regs.; see also Rev. Proc. 77-29, 1977-2 C.B.
538 (providing guidance as to acceptable evidence for
substantiating wagering wins and losses). Here, petitioners do
not dispute that they failed to maintain records of their
gambling activities. Accordingly, the burden of proof as to
petitioners’ gambling losses is not placed on respondent, and
petitioners bear the burden of substantiating the amount of any
claimed gambling loss deduction. See Hradesky v. Commissioner,
65 T.C. 87, 90 (1975), affd. 540 F.2d 821 (5th Cir. 1976).
Moreover, as discussed in greater detail below, although
petitioners have introduced evidence substantiating some losses–-
and respondent has conceded some losses--petitioners have failed
to introduce credible evidence, as required by section 7491(a),
7(...continued)
petitioners fail this requirement, having failed to produce any
documents to substantiate their gambling winnings and losses
after receiving from respondent a December 1998 letter regarding
the examination of their 1996 Federal tax liabilities. Because
we conclude that petitioners have failed the substantiation and
record-keeping requirements of sec. 7491(a)(2)(A) and (B), we
need not decide whether petitioners also fail the cooperation
test.
The benefits of sec. 7491 are also unavailable if the
taxpayer fails certain net-worth limitations. See sec.
7491(a)(2)(C). Respondent does not argue that petitioners fail
the net-worth limitations.
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