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Section 7491 does not define what constitutes credible
evidence; however, the conference report preceding enactment of
the Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206, 112 Stat. 685, states:
Credible evidence is the quality of evidence which,
after critical analysis, the court would find
sufficient upon which to base a decision on the issue
if no contrary evidence were submitted (without regard
to the judicial presumption of IRS correctness). A
taxpayer has not produced credible evidence for these
purposes if the taxpayer merely makes implausible
factual assertions, frivolous claims, or tax protestor-
type arguments. The introduction of evidence will not
meet this standard if the court is not convinced that
it is worthy of belief. If after evidence from both
sides, the court believes that the evidence is equally
balanced, the court shall find that the Secretary has
not sustained his burden of proof. [H. Conf. Rept.
105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-995.]
We have applied this definition in cases involving section 7491.
See Higbee v. Commissioner, 116 T.C. 438, 442-443 (2001) (quoting
legislative history and deciding taxpayers’ evidence did not meet
requirements of section 7491(a)). Also, in Managan v.
Commissioner, T.C. Memo. 2001-192, a case involving a claimed
exclusion under section 104(a)(2), we held:
In order for respondent to have the burden of proof on
a factual issue, petitioner must introduce credible
evidence relating to the issue. Sec. 7491(a).
Evidence is credible if a court would find it
“sufficient upon which to base a decision on the issue
if no contrary evidence were submitted”. Higbee v.
Commissioner, 116 T.C. ___, ___ (2001) (slip op. at 8)
(quoting H. Conf. Rept. 105-599 at 240 (1998), 1998-3
C.B. 755, 994). * * *
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