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C. Analysis
1. The Paulan Direct Payments
For reasons discussed infra, we agree with respondent that
petitioners have failed to introduce credible evidence that the
Paulan direct payments provided them with bases in Sidal during
the audit years. Therefore, it is unnecessary to address the
issue of petitioners’ compliance with the requirement of section
7491(a)(2)(A) “to substantiate any item” as it may apply to those
payments.
Because we find that petitioners have failed to introduce
credible evidence that the Paulan direct payments provided
petitioners with basis in Sidal, we decide the basis issue as it
relates to those payments in respondent’s favor; i.e., the
absence of credible evidence that petitioners acquired bases in
Sidal by virtue of the Paulan direct payments necessarily means
that petitioners cannot sustain their resulting burden of proof
with respect to those payments. See Bernardo v. Commissioner,
supra n.7.
2. The Wire Transfer Payments
Because we base our decision (discussed infra) regarding
petitioners’ bases in Sidal attributable to the wire transfer
payments upon a preponderance of the evidence, assignment of the
burden of proof under section 7491 is unnecessary. See FRGC
Inv., LLC v. Commissioner, T.C. Memo. 2002-276, affd. on this
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