Perry Funeral Home, Inc. - Page 7

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               Respondent on June 26, 2002, issued to petitioner the                  
          statutory notice of deficiency underlying the present litigation.           
          Therein, respondent determined, inter alia, that moneys received            
          under preneed contracts are to be characterized as income to                
          petitioner in the year of receipt.                                          
          I.  Preliminary Matters                                                     
               A.  Burden of Proof                                                    
               In general, the Commissioner’s determinations are presumed             
          correct, and the taxpayer bears the burden of proving otherwise.            
          Rule 142(a).  Section 7491, effective for court proceedings that            
          arise in connection with examinations commencing after July 22,             
          1998, may operate, however, in specified circumstances to place             
          the burden on the Commissioner.  Internal Revenue Restructuring &           
          Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727.           
          With respect to factual issues and subject to enumerated                    
          limitations, section 7491(a) may shift the burden of proof to the           
          Commissioner in instances where the taxpayer has introduced                 
          credible evidence.  Concerning penalties and additions to tax,              
          section 7491(c) places the burden of production on the                      

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