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2. Petitioners' Schedule E
During 1999, petitioners owned a house in Lithonia, Georgia.
Petitioner received approval from DeKalb County, Georgia, to
participate in its public assistance program. Petitioner
received rents of $11,405 for his tenants from DeKalb County
under that program. On their Schedule E for 1999, petitioners
reported a rental real estate loss of $2,635 from the rental of
the house.
Petitioners offset the rental real estate loss against the
wage income earned from Eli Lilly. Respondent disallowed
petitioners' rental real estate loss.
C. Accuracy-Related Penalty
Respondent also determined that petitioners are liable for
an accuracy-related penalty under section 6662(a).
Discussion
Under section 7491(a)(1), the burden of proof may shift to
the Commissioner. Because petitioners failed to meet the
requirements of section 7491(a)(2), the burden of proof does not
shift to respondent in this case. As to the accuracy-related
penalty, respondent has the burden of production; the burden of
persuasion remains with petitioners. See sec. 7491(c); Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001).
Respondent's determinations are presumed correct, and
petitioners bear the burden of proving otherwise. Welch v.
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