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On July 8, 2005, respondent issued the aforementioned notice
of deficiency. Petitioners then filed a timely petition with
this Court. A trial was held on March 5, 2007, in Knoxville,
Tennessee.
Discussion
I. Burden of Proof
As a general rule, the Commissioner’s determination of a
taxpayer’s liability is presumed correct, and the taxpayer bears
the burden of proving that the determination is improper. See
Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
However, pursuant to section 7491(a), the burden of proof on
factual issues that affect the taxpayer’s tax liability may be
shifted to the Commissioner where the “taxpayer introduces
credible evidence with respect to * * * such issue”. In the
instant case, petitioners have neither asserted nor demonstrated
that they satisfied the requirements of section 7491(a),
including the requirement to maintain required records, to shift
the burden of proof onto respondent with respect to any factual
issue. Consequently, the burden of proof remains on petitioners.
II. General Deduction Rules
Deductions are a matter of legislative grace, and the
taxpayer must maintain adequate records to substantiate the
3(...continued)
gross income. See sec. 67(a). The amount of petitioners’ total
reported miscellaneous deductions was $23,269.
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Last modified: November 10, 2007