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to section 7491(a), the burden of proof on factual issues that
affect 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 argue
that the burden should shift, and they failed to comply with the
substantiation requirements. Accordingly, the burden of proof
remains on petitioners.
II. Deductions
A. General Rules
Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving that he is entitled to any
claimed deductions. INDOPCO, Inc. v. Commissioner, 503 U.S. 79,
84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934). Taxpayers must maintain records relating to their income
and expenses and must prove their entitlement to all claimed
deductions, credits, and expenses in controversy. See sec. 6001;
Rule 142(a); INDOPCO, Inc. v. Commissioner, supra at 84; Welch v.
Helvering, supra at 115.
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Last modified: March 27, 2008