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allowable. On the basis of those determinations, respondent
calculated a deficiency in tax of $7,908 and on July 5, 2005,
sent petitioners a notice of deficiency. Petitioners timely
petitioned this Court for a redetermination of the disallowed
amounts.
Discussion
As a general rule, the Commissioner’s determinations in the
notice of deficiency are presumed correct, and the burden of
proving an error is on the taxpayer. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). However, pursuant to
section 7491(a), the burden of proof with respect to any factual
issue relating to ascertaining the liability for tax shifts to
the Commissioner if the taxpayer: (1) Maintained adequate
records; (2) satisfied the substantiation requirements; (3)
cooperated with the Commissioner’s agents; and (4) during the
Court proceeding introduced credible evidence with respect to the
factual issue involved. Except for the substantiation
requirements for some items, discussed infra, we find that
petitioners satisfied these requirements.
Issue 1. Loss From Farming
During 2002, petitioners owned a 45-acre farm in Williamson
County, Texas. In calculating their 2002 gross income,
petitioners included a loss of $20,116, which was supported by
Schedule F, Profit or Loss From Farming. The Schedule F does not
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