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remanding T.C. Memo. 2002-6. The issue for decision on remand is
whether respondent has met his burden of proving that petitioners
are not entitled to deduct as business expenses certain real
property taxes paid by Mr. Griffin with respect to properties
owned by two partnerships in which petitioners’ wholly owned S
corporation was a partner.
In our original opinion, we sustained respondent’s
determination that petitioners were not entitled to deduct the
real property tax payments. In doing so, we held that the burden
of proof was not placed on respondent pursuant to section
7491(a)(1), because we found that petitioners failed to introduce
credible evidence that they were engaged, in their individual
capacities, in a trade or business for which the tax payments
would have represented ordinary and necessary expenses.1 See,
e.g., Lohrke v. Commissioner, 48 T.C. 679 (1967).
On appeal, the Court of Appeals for the Eighth Circuit held
that petitioners “did produce sufficient ‘credible evidence’ to
support their personal deductions of the real property tax
payments at issue.” Griffin v. Commissioner, supra at 1021.
Accordingly, the Court of Appeals held that the burden of proof
should be placed on respondent pursuant to section 7491(a)(1) and
remanded this case for further consideration on the merits as to
1 Unless otherwise indicated, section references are to the
Internal Revenue Code as amended.
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