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relevant to ascertaining the tax liability of the taxpayer if the
taxpayer introduces “credible evidence” with respect to the
issue.
While the statute itself does not define “credible evidence”,
the legislative history states as follows:
Credible evidence is the quality of evidence, which,
after critical analysis, the court would find
sufficient upon which to base a decision on the issue
if no contrary evidence were submitted (without regard
to the judicial presumption of IRS correctness). * * *
If after evidence from both sides, the court believes
that the evidence is equally balanced, the court shall
find that the Secretary has not sustained his burden of
proof. [H. Conf. Rept. 105-599, at 240-241 (1998),
1998-3 C.B. 747, 994-995.]
See also Blodgett v. Commissioner, 394 F.3d 1030 (8th Cir. 2005),
affg. T.C. Memo. 2003-212.
As more fully discussed hereinafter, section 7491(a) has no
effect on our findings with respect to most of the issues in this
case, as our conclusions are based upon a preponderance of the
evidence. See id. The exceptions concern the deductions for
rent and taxes taken by Floors Trust and Harlan’s liability for
self-employment tax. As discussed below, since petitioners
offered no credible evidence with respect to these issues, the
burden of proof remains with them to show error in respondent’s
determinations, and they have not satisfied the burden.
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