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Discussion
1. Burden of Proof
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 on
factual issues that affect a taxpayer’s tax liability may be
shifted to the Commissioner where the “taxpayer introduces
credible evidence with respect to * * * such issue.” Sec.
7491(a)(1). The burden will shift only if the taxpayer has
complied with the substantiation requirements and has cooperated
with the Commissioner’s reasonable requests for witnesses,
information, documents, meetings, and interviews. Sec.
7491(a)(2). And the taxpayer must keep records sufficient to
establish the amount of the items required to be shown on his
Federal income tax return. See sec. 6001; sec. 1.6001-1(a), (e),
Income Tax Regs.
Petitioners have not alleged or proven that section 7491(a)
applies; accordingly, the burden remains on petitioners to show
that they are entitled to the deductions. See INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992) (stating that deductions are
strictly a matter of legislative grace, and taxpayers bear the
burden of proving that they are entitled to claim the deduction).
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Last modified: March 27, 2008