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OPINION
There are several issues for decision. We are asked to
decide, first, whether petitioners engaged in their lemon farming
activity for profit. We are also asked to decide whether
petitioners are liable for taxes on interest income and capital
gains that petitioners admit they earned for the years at issue,
but were excluded from the initial Form 4549A petitioners signed.
Finally, we must decide whether petitioners are liable for the
accuracy-related penalty for each of the years at issue. We
address each of these issues in turn, after first considering the
burden of proof.
I. Burden of Proof
In general, the Commissioner’s determinations in the
deficiency notice are presumed correct, and the taxpayer bears
the burden of proving that the Commissioner’s determinations are
in error. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933). Section 7491(a) shifts the burden of proof to the
Commissioner with respect to a factual issue relevant to a
taxpayer’s liability for tax, however, under certain
circumstances. The burden shifts to the Commissioner if the
taxpayer introduces credible evidence with respect to the issue,
complies with substantiation requirements, maintains all required
records, and cooperates with the Commissioner’s reasonable
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Last modified: May 25, 2011