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III. Burden of Proof
The Gouveias argue that section 7491(a) shifts the burden of
proof to respondent with respect to all other issues. The
Gouveias further contend that according to the Court of Appeals
for the Ninth Circuit, respondent bears the burden of proof in
unreported income cases. Respondent contends that the Gouveias
do not meet the requirements of section 7491(a) and further
contends that respondent’s determinations are entitled to the
presumption of correctness. Although our resolution of the
issues in this case is based on the preponderance of the evidence
rather than the allocation of the burden of proof, we address the
parties’ arguments in the discussion that follows.
In general, respondent’s determinations in the notice of
deficiency are presumed to be correct, and the taxpayer bears the
burden of proving them wrong. Welch v. Helvering, 290 U.S. 111
(1933). Where the taxpayer produces credible evidence with
respect to any factual issue relevant to ascertaining the tax
liability of the taxpayer, the burden of proof shifts to the
Secretary, but only if the taxpayer has complied with
substantiation requirements, has maintained all required records,
and has cooperated with reasonable requests by the Secretary for
witnesses, information, documents, meetings, and interviews.
Sec. 7491(a).
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