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Discussion
Respondent’s determinations in the notice of deficiency are
presumed correct, and petitioners must prove those determinations
wrong in order to prevail. Rule 142(a)(1); Welch v. Helvering,
290 U.S. 111, 115 (1933). The submission of this case to the
Court under Rule 122 does not change or otherwise lessen
petitioners’ burden of proof. Rule 122(b); Kitch v.
Commissioner, 104 T.C. 1, 5 (1995), affd. 103 F.3d 104 (10th Cir.
1996). Whereas in certain cases section 7491(a) shifts the
burden of proof to the Commissioner, we conclude that this is not
one of those cases. Petitioners have neither alleged that
section 7491 is applicable to this case nor established that they
have complied with the requirements of section 7491(a)(2)(A) and
(B) to substantiate items, to maintain required records, and to
cooperate fully with reasonable requests of the Commissioner.
See sec. 7491(a)(2). Petitioners’ burden of proof in this case
is affected by the fact that we carefully scrutinize transactions
between related parties, Maxwell v. Commissioner, 95 T.C. 107,
116 (1990); C.M. Gooch Lumber Sales Co. v. Commissioner, 49 T.C.
649, 656 (1968), remanded pursuant to stipulation of the parties
406 F.2d 290 (6th Cir. 1969), and that the service agreement
between Clarkston and J.D. was such a transaction.
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