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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.
7491(a).
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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