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OPINION
As a general rule, the determinations of the Commissioner in
a notice of deficiency are presumed correct, and the taxpayer
bears the burden of proving the Commissioner’s determinations in
the notice of deficiency to be in error. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). As one exception to this
rule, section 7491(a) places upon the Commissioner the burden of
proof with respect to any factual issue relating to liability for
tax if the taxpayer maintained adequate records, satisfied the
substantiation requirements, cooperated with the Commissioner,
and introduced during the Court proceeding credible evidence with
respect to the factual issue. In the present case, the burden of
proof does not shift with respect to any factual issue relating
to petitioners’ liability for the income tax deficiency because
petitioners neither alleged that section 7491 was applicable nor
established that they complied with the substantiation
requirements of section 7491(a), as shown below. Sec.
7491(a)(2)(A) and (B). However, respondent has the burden of
production with respect to the accuracy-related penalty. Sec.
7491(c); Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001).
Therefore, petitioners bear the burden of showing that they are
entitled to the claimed itemized deductions and that the IRA
distribution should not be included in their gross income.
Deductions are a matter of legislative grace and are allowed only
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Last modified: May 25, 2011