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OPINION
I. Burden of Proof
Petitioners argue that the burden of proof should be shifted
to respondent under section 7491(a) because petitioners produced
credible evidence and satisfied the requirements of section
7491(a)(2).
Generally, the Commissioner’s determinations are presumed
correct, and the taxpayer bears the burden of proving that those
determinations are erroneous. Rule 142(a)(1); Welch v.
Helvering, 290 U.S. 111, 115 (1933). Section 7491 is applicable
to court proceedings arising in connection with examinations
commenced after July 22, 1998. Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3001(c), 112 Stat. 727. Under section 7491(a)(1), the burden of
proof shifts to the Commissioner, subject to certain limitations,
where a taxpayer introduces credible evidence with respect to a
factual issue relevant to ascertaining the taxpayer’s tax
liability if the taxpayer introduces credible evidence regarding
the issue. See Ashley v. Commissioner, T.C. Memo. 2000-376.
Section 7491(a)(1) applies with respect to a factual issue only
if the requirements of section 7491(a)(2) are satisfied. Section
7491(a)(2) requires that a taxpayer have maintained all records
required by the Internal Revenue Code, cooperated with reasonable
requests by the Secretary for witnesses, information, documents,
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Last modified: March 27, 2008