-169-
111 T.C. 210 (1998). Such is especially so where the legislative
history of section 475 identifies the applicable mark-to-market
rule of that section as a method of accounting applicable to
securities dealers and also provides explicit rules under which
taxpayers may change their methods of accounting to comply with
the mark-to-market requirement. E.g., H. Rept. 103-111, supra at
666, 1993-3 C.B. at 236, 242.
III. Burden of Proof
Petitioner argues that respondent bears the burden of proof
as to any method of accounting issue because, petitioner asserts,
the notices of deficiency are arbitrary and excessive as to
respondent’s method for reporting FNBC’s swaps income. According
to petitioner, respondent’s method set forth in the notices of
deficiency is the midmarket method, and it is only respondent who
disputes that sound economic principles lead to the conclusion
that the fair market value of a swap is not its midmarket value.
Respondent argues in rebuttal that petitioner bears the burden of
proof. First, respondent asserts, the notices of deficiency are
neither arbitrary nor excessive as to the method of accounting
issue. Second, respondent asserts, petitioner has previously
acknowledged to the Court that it bears the burden of proof and,
in any event, has raised this issue untimely.
We agree with respondent that petitioner bears the burden of
proof as to the method of accounting issue. Indeed, petitioner’s
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