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Stat. 727. Under section 7491, the burden of proof shifts from
the taxpayer to the Commissioner if the taxpayer produces
credible evidence with respect to any factual issue relevant to
ascertaining the taxpayer’s tax liability. Sec. 7491(a)(1).
However, section 7491(a)(1) applies with respect to an issue only
if the taxpayer has complied with the requirements under the Code
to substantiate any item, has maintained all records required
under the Code, and has cooperated with reasonable requests by
the Commissioner for witnesses, information, documents, meetings,
and interviews. See sec. 7491(a)(2)(A) and (B).
Petitioner failed to appear at trial or to produce any
credible evidence. Petitioner has no records or information as
to where the pay phones are located or as to the amount of
revenue that they produced. Therefore, the burden of proof has
not shifted to respondent. Nonetheless, our findings in this
case are based on a preponderance of the evidence.
Depreciation Deduction
Section 167(a) allows as a depreciation deduction a
reasonable allowance for the “exhaustion, wear and tear” of
property (1) used in a trade or business or (2) held for the
production of income. Sec. 167(a)(1) and (2). Depreciation
deductions are based on an investment in and actual ownership of
property rather than the possession of bare legal title. See
Grant Creek Water Works, Ltd. v. Commissioner, 91 T.C. 322, 326
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Last modified: May 25, 2011