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OPINION
I. Burden of Proof
Petitioners argue that respondent bears the burden of proof
under section 7491(a)(1) because petitioners provided credible
evidence that the payments made by RAF on behalf of the Lenzens
were loan repayments. Under section 7491(a)(1), the Commissioner
bears the burden of proof if a taxpayer “introduces credible
evidence with respect to any factual issue relevant to
ascertaining the liability of the taxpayer”. Section 7491(a)(2)
limits the shifting of the burden of proof to situations in which
a taxpayer has complied with substantiation requirements under
the Internal Revenue Code (the Code), has maintained all records
required by the Code, has cooperated with reasonable requests by
the Commissioner for witnesses, information, documents, meetings,
and interviews, and, in the case of a corporation, partnership,
or trust, meets the net worth requirement of 28 U.S.C. sec.
2412(d)(2)(B). Sec. 7491(a)(2)(A)-(C).
First, petitioners have not presented credible evidence that
the payments by RAF of the Lenzens’ personal expenses were
repayments of loans Mr. Lenzen made to RAF. The only evidence
petitioners presented regarding the existence of the loans was an
illegible copy of a ledger and testimony that the loans were
made. Petitioners presented no evidence that the credit card
payments were intended to repay those loans.
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Last modified: May 25, 2011