Sioana U. and S. Moli Ngatuvai - Page 7

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               In general, taxpayers bear the burden of proof with respect            
          to whether they are entitled to an exclusion.  See Rule 142(a);             
          Welch v. Helvering, 290 U.S. 111, 115 (1933).  Exclusions from              
          gross income should be construed narrowly, and taxpayers must               
          bring themselves within the clear scope of the exclusion.  See              
          Dobra v. Commissioner, 111 T.C. 339, 349 n.16 (1998).  The burden           
          may shift to the Commissioner if the taxpayer introduces credible           
          evidence and satisfies the requirements under section 7491(a)(2)            
          to substantiate items, maintain required records, and fully                 
          cooperate with the Commissioner’s reasonable requests.  Sec.                
               In the present case, the burden of proof remains on                    
          petitioners, since they have neither taken a position as to                 
          whether the burden of proof should be placed on respondent nor              
          established that they have complied with the requirements of                
          section 7491(a).  As such, petitioners have failed to meet their            
          burden that they are entitled to any of the exclusions under                
          section 108(a)(1).  There is no evidence in the record that                 
          discharge of the USDA loan occurred as part of a bankruptcy                 
          proceeding or that the USDA loan constitutes a qualified real               
          property business indebtedness.  The record does not support a              
          conclusion that the USDA loan is a qualified farm indebtedness.             
          Petitioners were no longer in the trade or business of farming 3            
          years prior to the discharge of said loan in 2001, as required              

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