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Petitioners argue that they did provide credible evidence
and complied with the substantiation and record-keeping
requirements of the Code. We disagree.
The legislative history of section 7491 defines “credible
evidence” as “the quality of evidence which, after critical
analysis, the court would find sufficient upon which to base a
decision on the issue if no contrary evidence were submitted
(without regard to the judicial presumption of IRS correctness).”
H. Conf. Rept. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-
995; see Higbee v. Commissioner, supra at 442. On the basis of
the record, we conclude that petitioners failed to meet this
standard.
Most of the expense deductions reported in the stipulated
summaries for 1997 were substantiated only by petitioners’ oral
or written testimony, which we deemed not credible, as discussed
below. Further, when records had been provided to respondent’s
auditor, petitioners did not submit credible evidence that the
purpose of the expenses was other than personal. We further note
that no summaries were provided for 1998.
After the fire in their residence, which occurred after
respondent’s audit and the issuance of the notice of deficiency,
petitioners searched through the rubble to try to find the
records for 1997 and 1998, but none were found. Petitioners did
not contact any third party to assist in the record
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