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Discussion
In general, the Commissioner’s determination as set forth in
a notice of deficiency is presumed correct. Welch v. Helvering,
290 U.S. 111, 115 (1933). In pertinent part, Rule 142(a)(1)
provides the general rule that the burden of proof shall be on
the taxpayer. In certain circumstances, however, if the taxpayer
introduces credible evidence with respect to any factual issue
relevant to ascertaining the proper tax liability, section 7491
shifts the burden of proof to the Commissioner. Sec. 7491(a)(1);
Rule 142(a)(2). Petitioners did not argue that section 7491 is
applicable, and they did not establish that the burden of proof
should shift to respondent. Petitioners, therefore, bear the
burden of proving that respondent’s determinations as set forth
in the notice of deficiency are erroneous. See Rule 142(a);
Welch v. Helvering, supra at 115.
With respect, however, to the issues raised in respondent’s
answer, which increased the amount of the deficiency, Rule
142(a)(1) places the burden of proof on respondent.
Finally, with respect to any penalty or addition to tax,
section 7491(c) places the burden of production on the
Commissioner.
Schedule E Expenses
Petitioners maintain that they are entitled to deduct
$24,788 in Schedule E expenses for the South Green Street
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Last modified: March 27, 2008