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Section 7491(a)(1) applies in court proceedings arising only
in connection with examinations commencing after July 22, 1998.16
See RRA 1998 sec. 3001(c), 112 Stat. 727. Agent Daleiden’s first
contact letter regarding 1995 was mailed to petitioners in April
1998. Accordingly, respondent’s examination of petitioners’
1995 return commenced prior to the effective date of section
7491. Seawright v. Commissioner, 117 T.C. 294 (2001). Thus, we
find section 7491 inapplicable to petitioners’ 1995 return.
Since the examination of petitioners’ 1996 and 1997 returns
commenced after the effective date of section 7491, we must
consider the provisions of that section. The burden of proof
will shift to the Commissioner only after the taxpayer introduces
“credible evidence” with respect to a factual issue relevant to
ascertaining the taxpayer’s income tax liability. See sec.
7491(a). The statute fails to define what constitutes “credible
evidence”. The conference committee report assists in
determining its intended meaning:
16The House conference report states:
An audit is not the only event that would be considered
an examination for purposes of this provision. For
example, the matching of an information return against
amounts reported on a tax return is intended to be an
examination for purposes of this provision. Similarly,
the review of a claim for refund prior to issuing that
refund is also intended to be an examination for
purposes of this provision. [H. Conf. Rept. 105-599, at
242 (1998), 1998-3 C.B. 747, 996.]
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