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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.”
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