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dealership held the classic cars for sale to customers, then we
must find for petitioner. We begin with who has the burden of
proof.
A. Burden of Proof
The Commissioner’s determination in the notice of deficiency
is generally presumed to be correct, and the taxpayer bears the
burden of proving otherwise. Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933). If a taxpayer introduces credible
evidence with respect to a factual issue relevant to ascertaining
the taxpayer’s tax liability, however, the burden shifts to the
Commissioner with respect to that issue, assuming the taxpayer
meets certain other requirements.11 Sec. 7491(a)(1). The burden
of proof does not shift unless the taxpayer has complied with the
substantiation requirements, maintained required records, and
cooperated with the Commissioner’s reasonable requests for
witnesses, information, and meetings. Sec. 7491(a)(2)(A) and
(B). The taxpayer has the burden of establishing that each
requirement of section 7491(a)(2) has been met. Higbee v.
Commissioner, 116 T.C. 438 (2001). Respondent concedes that
10(...continued)
question whether property is held primarily for sale to customers
in the ordinary course of one's business is "purely factual."
Pritchett v. Commissioner, 63 T.C. 149, 162 (1974).
11Sec. 7491(a) applies to examinations commenced after July
22, 1998, and therefore applies to this case involving tax years
1999 and 2000.
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