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convincing evidence that the Bensons fraudulently intended to
evade the payment of their income taxes. However, respondent has
persuaded us that the Bensons substantially understated their
income.
A. The Burden of Proof and the Statute of Limitations
A determination made by the Commissioner in a notice of
deficiency is presumed correct, and the taxpayer bears the burden
of proving that determination incorrect.41 Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933).
Generally, the Commissioner must assess the amount of tax
within 3 years after a return is filed. See sec. 6501(a). The
Code provides exceptions to this period of limitations. One
exception, of course, is for fraud. See sec. 6501(c). In
pertinent part, section 6501(c) provides:
SEC. 6501(c). Exceptions.--
(1) False return.–-In the case of a false or
fraudulent return with the intent to evade tax, the tax
may be assessed, or a proceeding in court for
collection of such tax may be begun without assessment,
at any time.
41Sec. 7491(a)(1) provides that the burden of proof shifts
to the Commissioner if the taxpayer introduces credible evidence
with respect to any factual issue relevant to ascertaining the
tax liability of the taxpayer. Sec. 7491(a)(1) applies to court
proceedings arising in connection with examinations commencing
after July 22, 1998. See Internal Revenue Service Restructuring
and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat.
726. The record indicates that the examinations of petitioners’
returns began prior to the effective date of sec. 7491. Thus,
sec. 7491 is inapplicable to this case. See Seawright v.
Commissioner, 117 T.C. 294 (2001).
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