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case. Consequently, we hold that petitioners have the burden of
proof as to any disputed factual issue. See Rule 142(a). With
respect to a taxpayer’s liability for any penalty, however,
section 7491(c) places on the Commissioner the burden of
production.
A. Anchor Distribution
Petitioners do not dispute that Julie received from Anchor a
check payable to her in the amount of $27,641, which check
represented the lump-sum cash surrender value of the annuity.
Petitioners contend that Phyllis listed Julie as the successor
owner subject to an oral trust, with the intent and instruction
that Julie distribute the funds to the children upon Phyllis’s
death. Moreover, petitioners assert that Phyllis’s instruction
to Julie is consistent with the directives in her 1991 Trust and
will that her estate be distributed equally among the children.
Petitioners further assert that when Julie received the
distribution, she did not take any part of the distribution, but
complied with Phyllis’s directive and divided the distribution
equally among the children. Petitioners therefore contend that
the distribution should not be included in their gross income.
Respondent, on the other hand, does not dispute that Julie
distributed the proceeds one-third each to Mark, Paul, and Heidi,
but contends that petitioners must include the distribution in
their gross income because Julie was entitled to the entire
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