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petitioners have submitted credible evidence; i.e., evidence
which, after critical analysis, is sufficient on which to base a
decision sustaining the ad hoc committee’s calculations regarding
the portion of the monthly service fees that is allocable to
medical care under the percentage method.27 Accordingly, we hold
that respondent bears the burden of proof regarding the portions
of the monthly service fees paid by petitioners in 1997 and 1998
that are allocable to medical care under the percentage method.28
However, with respect to the claimed deductions for medical
use of the pool, spa, and exercise facilities, we find that
petitioners have not submitted credible evidence. The financial
information discussed above, as further explained below, does not
contain specific figures or calculations by Mr. Dalton or AFVW
relating to expenditures for the facilities that are sufficient
27See Forste v. Commissioner, T.C. Memo. 2003-103 (holding
that taxpayers produced credible evidence in the form of draft
proposal offers and final settlement agreement that was
sufficient to show that a payment was made in settlement of tort
or tort-type claim for personal injury).
28On brief, petitioners argue that respondent’s reliance on
Mr. Powell’s report and use of the actuarial method constitutes a
new matter. Petitioners may be correct, especially in light of
the fact that any appeal in this case would normally lie to the
Court of Appeals for the Ninth Circuit. See, e.g., Estate of
Harper v. Commissioner, T.C. Memo. 2002-121 (discussing recent
decisions by the Court of Appeals for the Ninth Circuit regarding
burden of proof). However, because we have already held that
respondent has the burden of proof, we need not reach this issue.
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