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examination of petitioners’ returns commenced after July 22,
1998; (2) Mr. Sowards introduced credible evidence as to all
contested issues; (3) he complied with all substantiation
requirements; and (4) he cooperated with respondent’s reasonable
requests. Respondent argues that with regard to petitioners’
1995 return, section 7491 is inapplicable since the examination
commenced prior to the effective date. Respondent relies upon
Agent Daleiden’s testimony that the first contact letter was sent
to petitioners in April of 1998. With respect to 1996 and 1997,
respondent argues that petitioners have failed to comply with the
requirements of section 7491(a)(2)(A) and (B). For the reasons
detailed below, we find the burden of proof does not shift to
respondent.
Generally, a determination made by the Commissioner in a
notice of deficiency issued to the taxpayer is presumed correct,
and the taxpayer bears the burden of proving that determination
incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933). However, section 7491(a)(1) provides that if the
taxpayer introduces credible evidence with respect to any factual
issue relevant to ascertaining the tax liability of the taxpayer,
the burden of proof shifts to the Commissioner with respect to
that issue. Section 7491(a) was added to the Code by the
Internal Revenue Service Restructuring and Reform Act of 1998
(RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726.
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