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not increase the amount of the deficiency. Indeed, as will be
discussed, the items for which respondent requested
substantiation are items for which petitioner bears the burden of
proof at trial. The Court concludes that respondent did not
raise new matters that would shift the burden of proof regarding
the capital loss carryovers and the rental expenses to
respondent.
B. Section 7491
Alternatively, the burden of proof may shift to the
Commissioner under section 7491(a). However, because petitioner
failed to comply with the substantiation and record-keeping
requirements of section 7491(a)(2) and to introduce credible
evidence within the meaning of section 7491(a)(1), section 7491
does not place the burden of proof on respondent with respect to
the claimed deductions. Under section 7491(c), respondent
retains the burden of production only with respect to
petitioner’s liability for any penalties or additions to tax.
2. Capital Loss Carryforwards
Petitioner claimed a $3,000 capital loss deduction in 1999.
This deduction results primarily from her application of capital
loss carryforwards from 1998.
Section 165(a) generally permits deductions for losses
sustained during the taxable year and not compensated for by
insurance or otherwise. However, capital losses on the sale or
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