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are a matter of legislative grace, and the taxpayer bears the
burden of proving that he is entitled to any claimed deductions.
New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
However, pursuant to section 7491(a), the burden of proof on
any factual issue that affects the taxpayer’s tax liability may
be shifted to the Commissioner where the “taxpayer introduces
credible evidence with respect to * * * such issue”. The burden
will shift only if the taxpayer has, inter alia, complied with
substantiation requirements pursuant to the Internal Revenue Code
and “cooperated with reasonable requests by the Secretary for
witnesses, information, documents, meetings, and interviews”.
Sec. 7491(a)(2). In the instant case, petitioners did not
present any credible evidence at trial. Notably, the Court did
not find Mr. Wright’s testimony to be credible, as he often
provided inconsistent and implausible answers. In addition,
petitioners did not comply with the substantiation requirements
and failed to provide respondent with requested documents.19
Accordingly, section 7491(a) is inapplicable, and the burden
19Respondent sent Wright & Associates Form 4564, Information
Document Request, on July 9 and Dec. 16, 2002, and Jan. 9, 2003,
to which petitioners failed to respond fully and properly.
Respondent then formally repeated the three requests by issuing
Formal Document Requests with a letter explaining the matter on
Dec. 5 and 19, 2002, and Jan. 27, 2003. Subsequently, during
discovery, petitioners failed to respond to respondent’s
interrogatories and request for production of documents, and
provided incomplete responses after the Court granted
respondent’s motions to compel. See infra note 20.
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