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Petitioner was a director and the chief financial officer of
PPS, he did not work for any other entity in 2002, and he spent
his time developing the technology and organizing PPS.
Petitioner assigned his interests in the technology to PPS in
2003, and it was not patented until 2005.
Discussion
1. Burden of Proof
Generally, 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. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). But the burden of
proof is shifted to the Commissioner when he seeks to raise a
“new matter”, which is defined as a new assertion that does not
simply narrow the issue raised in the deficiency notice and
either alters the amount of the original deficiency or requires
the presentation of different evidence. See Rule 142(a); Estate
of Falese v. Commissioner, 58 T.C. 895, 897-899 (1972); McSpadden
v. Commissioner, 50 T.C. 478, 491-492 (1968); Papineau v.
Commissioner, 28 T.C. 54, 57 (1957); Tauber v. Commissioner, 24
T.C. 179, 185 (1955). Where the new assertion merely clarifies
or develops the original determination’s basis without increasing
the deficiency amount, the burden of proof does not shift to the
Commissioner. See Estate of Abraham v. Commissioner, 408 F.3d 26
(1st Cir. 2005), affg. T.C. Memo. 2004-39; Shea v. Commissioner,
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