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received unreported income from marijuana sales and from
construction activities.
As a general rule, the taxpayer bears the burden of proving
error in the Commissioner’s determinations. Rule 142(a).
Although section 7491 may shift the burden to the Commissioner in
certain circumstances, the section is applicable only to court
proceedings that arise in connection with examinations commencing
after July 22, 1998. Internal Revenue Service Restructuring &
Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727.
It is apparent from the record in this case that the examination
commenced prior to July 22, 1998, and, therefore, section 7491
has no application.
Courts have recognized a limited exception to the general
rule where the notice of deficiency determines that the taxpayer
failed to report income, particularly income derived from illegal
activities. Llorente v. Commissioner, 649 F.2d 152, 156 (2d Cir.
1981), affg. in part and revg. in part 74 T.C. 260 (1980);
Weimerskirch v. Commissioner, 596 F.2d 358, 360-362 (9th Cir.
1979), revg. 67 T.C. 672 (1977); Petzoldt v. Commissioner, 92
T.C. 661, 687-688 (1989). In such circumstances, respondent must
come forward with evidence establishing a minimal foundation,
which may consist of evidence linking the taxpayer with an
income-producing activity. Weimerskirch v. Commissioner, supra
at 360-361; Petzoldt v. Commissioner, supra at 689.
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