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methods was appropriate, respondent’s determinations were not
arbitrary or excessive, and petitioners bear the burden of going
forward. See Merritt v. Commissioner, 301 F.2d 484, 486 (5th
Cir. 1962), affg. T.C. Memo. 1959-172; Schroeder v. Commissioner,
40 T.C. 30, 33 (1963).
Respondent concedes that, pursuant to Rule 142(a), he bears
the burden of proof on matters relating to the increases in the
deficiencies pleaded in his amendment to answer. With respect to
all of the remaining matters, our conclusion is unaffected by who
bears the burden of proof.3 Accordingly, we need not address the
parties’ burden of proof contentions.
II. Respondent’s Income Determinations
Respondent contends that David failed to report income he
received from Demetree and Associates and property he had
transferred to family members and friends. Petitioners contend
that the amounts they received were gifts and loans and that
David’s transfers of properties were bona fide transactions.
A. Demetree and Associates
Respondent contends that all of the income earned by
Demetree and Associates should have been attributed to David
because he, and not Arthur, controlled the business. Respondent
asserts that: David performed the managing and leasing
activities relating to Demetree and Associates; Arthur was never
3 Sec. 7491 is inapplicable because the examination of
petitioners’ returns began before the statute’s effective date.
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