- 20 - entitled to the deductions claimed.5 Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); Welch v. Helvering, 290 U.S. 111 (1933). Section 7491(a) shifts the burden of proof to the Commissioner respecting tax liability under certain circumstances. The burden does not shift in this case because petitioner neither alleged that section 7491(a) was applicable nor established that she fully complied with the statutory substantiation requirements of section 7491 as shown below. Sec. 7491(a)(2)(A) and (B). If petitioner fails to establish Port of Mystery’s entitlement to the deductions under section 162,6 and fails to show error in respondent’s determination that Port of Mystery was an activity not engaged in for profit, then section 183 limits 5The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(a), which is applicable to Court proceedings arising in connection with examinations commencing after July 22, 1998. Under sec. 7491(a), Congress requires the burden of proof to be placed on the Commissioner, where a taxpayer introduces credible evidence with respect to factual issues relevant to ascertaining the taxpayer’s liability for tax, and meets certain other requirements. In the instant case, petitioner has not raised the application of this provision, and petitioner has not presented such credible evidence, nor met all other applicable requirements; therefore, the burden remains with petitioner. 6Sec. 183(c) provides that an activity is not engaged in for profit if the activity is “other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212.”Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Next
Last modified: May 25, 2011