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Discussion
The Commissioner’s determinations in a notice of deficiency
are presumed correct, and the taxpayer has the burden to prove
that the determinations are in error. See Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). But the burden of proof on
factual issues that affect a taxpayer’s tax liability may be
shifted to the Commissioner where the “taxpayer introduces
credible evidence with respect to * * * such issue.” See sec.
7491(a)(1). The burden will shift only if the taxpayer has
complied with the substantiation requirements and has cooperated
with the Commissioner’s reasonable requests for witnesses,
information, documents, meetings, and interviews. See sec.
7491(a)(2). Petitioner has not proven or even alleged that
section 7491(a) applies; accordingly, the burden remains on him
to show that he is entitled to the claimed deductions.
U.S. individuals are subject to Federal income taxation on
their taxable income on a worldwide basis. See sec. 1; Cook v.
Tait, 265 U.S. 47 (1924). But a U.S. individual who is a bona
fide resident of Puerto Rico for the entire taxable year is not
subject to Federal taxation with respect to his items of income
that are sourced within Puerto Rico except for amounts received
for services as an employee of the U.S. Government. See sec.
933(1). Notwithstanding the exemption provided by section
933(1), a U.S. individual residing in Puerto Rico is not exempt
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Last modified: March 27, 2008