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proof is on the taxpayers. Rule 142(a). Accordingly, the burden
of establishing that the insolvency exception applies is
generally placed on the taxpayers. Traci v. Commissioner, T.C.
Memo. 1992-708; Bressi v. Commissioner, T.C. Memo. 1991-651,
affd. 989 F.2d 486 (3d Cir. 1993). In order to prove insolvency
and therefore qualify for the exception under section
108(a)(1)(B), a taxpayer
must prove by a preponderance of the evidence that he
or she will be called upon [as of the date of
cancellation of the debt] to pay an obligation claimed
to be a liability and that the total amount of
liabilities so proved exceed the fair market value of
his or her assets.
Merkel v. Commissioner, 192 F.3d 844, 850 (9th Cir. 1999), affg.
109 T.C. 463, 468 (1997).
There are exceptions to the general rule that the taxpayers
bear the burden of proof. See Rule 142(a)(1). One of those
exceptions is if the Commissioner raises a “new matter”. Id. If
the new matter is allowed to be raised, Rule 142(a) requires that
the Commissioner bear the burden of proof. Shea v. Commissioner,
112 T.C. 183, 190-191 (1999). The Commissioner raises a new
matter when he “attempts to rely on a basis that is beyond the
scope of the original deficiency determination”. Id. In
particular, a new matter is raised when the Commissioner’s new
theory “‘either alters the original deficiency or requires the
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