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taxpayer introduces credible evidence with respect to any factual
issue relevant to ascertaining the liability of the taxpayer for
any tax imposed by subtitle A or B of the Code, the burden of
proof as to that issue is on the Commissioner.11 Sec.
7491(a)(1); Nis Family Trust v. Commissioner, 115 T.C. 523, 538
(2000). Section 7491(a)(2) specifies certain requirements that
must be met for section 7491(a)(1) to apply. Respondent does not
argue that petitioners failed to satisfy the requirements of
section 7491(a)(2) and has stipulated facts showing that
petitioners have satisfied the requirements of section
7491(a)(2).12 Thus, section 7491(a)(1) applies to this case. If
petitioners introduced credible evidence with respect to any
factual issue relating to their tax liability, the burden of
proof is on respondent with respect to that factual issue.
11Sec. 7491(a), which is titled “Burden Shifts Where
Taxpayer Produces Credible Evidence”, was added to the Code by
the Internal Revenue Service Restructuring and Reform Act of 1998
(RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726. Sec.
7491(a) applies with respect to examinations that are commenced
after July 22, 1998. RRA 1998 sec. 3001(c), 112 Stat. 727. The
examination in this case commenced at some point after July 22,
1998.
12As relevant herein, sec. 7491(a)(2) provides that sec.
7491(a)(1) shall apply with respect to an issue only if “the
taxpayer has complied with the requirements under this title to
substantiate any item” and “the taxpayer has maintained all
records required under this title and has cooperated with
reasonable requests by the Secretary for witnesses, information,
documents, meetings, and interviews”.
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