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payment were includable in petitioner’s taxable income for 1996,
1997, and 1998, respectively.17 Respondent also determined a
penalty pursuant to section 6662 for all 3 years.
Refund Litigation
On February 14, 2002, petitioner filed a complaint in U.S.
District Court seeking a refund of the Federal income taxes
attributable to his including the November 1996 payment in income
on his 1996 return.
OPINION
I. Burden of Proof
The parties vigorously dispute who bears the burden of
proof. Section 7491(a) places the burden of proof on the
Commissioner with regard to certain factual issues if certain
conditions are met. Higbee v. Commissioner, 116 T.C. 438, 440
(2001). Section 7491 applies to examinations commenced after
July 22, 1998. Id. Respondent concedes that the examination of
petitioner’s 1996, 1997, and 1998 tax years began after the
effective date of section 7491.
Section 7491(a)(2) provides that the Commissioner will bear
the burden of proof with respect to an issue pursuant to section
7491(a) if:
(A) the taxpayer has complied with the
requirements under this title to substantiate any item;
17 Respondent also reduced petitioner’s itemized deductions
for 1996, 1997, and 1998 because of the increase in petitioner’s
income. This adjustment is purely computational.
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