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1099 were not introduced into evidence by petitioners or
respondent, but the amounts reflected on these forms for 1995
were stipulated by the parties.
Because petitioners have not introduced any credible
evidence regarding the amount of unreported income determined by
respondent, petitioners ultimately bear the burden of proof with
respect to this issue. Sec. 7491(a)(1);2 Rule 142(a); Ruidoso
Racing Association, Inc. v. Commissioner, 476 F.2d 502, 507-508
(10th Cir. 1973), affg. in part and remanding in part T.C. Memo.
1971-194 (“With regard to unreported income, the taxpayer must
prove that the determination is arbitrary or erroneous, and if it
does so the Commissioner must satisfy the court as to the
existence and amount of unreported income.”). The nature of the
business activity giving rise to respondent’s determination of
unreported income is not in dispute: Both the unreported
business income and the unreported wage income are connected to
petitioner’s undisputed sole proprietorship. Petitioners have
presented no evidence refuting respondent’s determination or
otherwise tending to show it to be arbitrary or erroneous. We
find that petitioners have failed to meet their burden and,
2Respondent asserts that the “audit in this case began on
April 3, 1998, so the provisions of I.R.C. sec. 7491 do not
apply.” Because sec. 7491 does not alter the outcome, however,
we need not decide whether its provisions are inapplicable in one
or both of these cases.
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