Horace D'Angelo - Page 10

                                        -10-                                          
                                      OPINION                                         
          I.   Burden of Proof                                                        
               In general, respondent’s determinations are presumed                   
          correct, and taxpayers bear the burden of proving them wrong.               
          Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).               
          As one exception to this rule, section 7491(a) places upon the              
          Commissioner the burden of proof with respect to any factual                
          issue relating to liability for tax if the taxpayer maintained              
          adequate records, satisfied applicable substantiation                       
          requirements, cooperated with respondent, and introduced during             
          the court proceeding credible evidence on the factual issue.  A             
          taxpayer such as petitioner must prove that he has satisfied the            
          recordkeeping, substantiation, and cooperation requirements                 
          before section 7491(a) places the burden of proof upon the                  
          Commissioner.  Prince v. Commissioner, T.C. Memo. 2003-247.                 
               In that the record is sufficient for us to decide this case            
          on its merits based on a preponderance of the evidence, we need             
          not and do not decide which party bears the burden of proof in              
          this case as to the substantive issues.  We note, however, that             
          we disagree with petitioner’s assertion that the notice of                  
          deficiency is arbitrary because it, unlike a notice of deficiency           
          issued to Pomeroy, did not include or refer to an exhibit that              
          explained the income-adjustment allocations relating to H.K.                
          Peach.  The notice of deficiency at hand correctly identified               






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