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certain circumstances, however, if the taxpayer introduces
credible evidence with respect to any factual issue relevant to
ascertaining proper tax liability, section 7491 places the burden
of proof on the Commissioner. Sec. 7491(a)(1); Rule 142(a)(2).
Credible evidence is “‘the quality of evidence which, after
critical analysis, * * * [a] court would find sufficient * * * to
base a decision on the issue if no contrary evidence were
submitted’”.2 Baker v. Commissioner, 122 T.C. 143, 168 (2004)
(quoting Higbee v. Commissioner, 116 T.C. 438, 442 (2001)).
Section 7491(a)(1) applies only if the taxpayer complies with
substantiation requirements, maintains all required records, and
cooperates with reasonable requests by the Commissioner for
witnesses, information, documents, meetings, and interviews.
Sec. 7491(a)(2). Although neither party alleges the
applicability of section 7491(a), we conclude that the burden of
proof has not shifted to respondent with respect to the issue in
the present case.
1. Was Petitioner Engaged in a Trade or Business?
The term “trade or business” is not defined by the Internal
Revenue Code. Commissioner v. Groetzinger, 480 U.S. 23, 27
(1987); Estate of Yaeger v. Commissioner, 889 F.2d 29, 33 (2d
2We interpret the quoted language as requiring the
taxpayer’s evidence pertaining to any factual issue to be
evidence the Court would find sufficient upon which to base a
decision on the issue in favor of the taxpayer. See Bernardo v.
Commissioner, T.C. Memo. 2004-199.
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