§3001

3001(c), 112 Stat. at 727. Because the examination giving rise to the adjustments ofthe Shorthorn partnership items began before July 22, 1998, sec. 7491(c) is inapplicable in this case.

3001, 112 Stat. at 726. The examination for the years in issue commenced with the revenue agent's letter sent to petitioner on December 30, 1997. Consequently, sec. 7491(a) is inapplicable.

3001(c)(2), 112 Stat. 726. Because the examination underlying this case commenced before July 23, 1998, sec. 7491(a) does not apply to shift the burden of proof to respondent.

3001(a), 112 Stat. 726. The examination of petitioners’ 1995 return commenced in 1997. Accordingly, sec. 7491 does not apply in the present case.

3001, 112 Stat. 726, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. Sec. 7491, however, is applicable to "court proceedings arising in connection with examinations commencing after the date of the enactment of this Act." RRA 1998 sec. 3001(c), 112 Stat. 727. Sec. 7491 is inapplicable to this case.

3001(a), (c)(1), 112 Stat. 685, 726, 727. However, the taxpayer still bears the burden of proving that the negligence penalty is inapplicable.

1987-566 (“It is often difficult to distinguish a ‘trade or business’ from passive investments held for the production of income.” (citing Higgins v. Commissioner, 312 U.S. 212, 217 (1941))). Whether a taxpayer is engaged in a 11(...continued) L. 105-206, sec. 3001(c), 112 Stat.

Section 7491, which is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by section 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 726, does not apply to place the burden of proof on respondent.

We hold, therefore, that the failure to identify the statutory provision requiring respondent's income adjustments in the notice of deficiency does not render the notice invalid .

Accordingly, we hold that petitioner is liable for accuracy-related penalties pursuant to section 6662(a) for 1993 and 1995 with respect to the understatements of tax attributable 3 Sec.

y command over property or enjoyment of its economic benefits.’” Cordes v. Commissioner, T.C. Memo. 1994-377 6 Sec. 7491(a) was added to the Internal Revenue Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, effective for court proceedings arising from examinations commencing after July 22, 1998. Sec. 7491(a)(1) provides that the burden of proof shifts to the Commissioner in specified circumstances. We conclude that sec. 7491

ascertaining the tax liability of the taxpayer. Sec. 7491(a)(1) applies to court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 726. The record indicates that the examinations of petitioners’ returns began prior to the effective date of sec. 7491. Thus, sec. 7491 is inapplicable to this case. See Seawright v. Commissioner, 117 T.C. 294 (2001). - 40 - T

ascertaining the tax liability of the taxpayer. Sec. 7491(a)(1) applies to court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 726. The record indicates that the examinations of petitioners’ returns began prior to the effective date of sec. 7491. Thus, sec. 7491 is inapplicable to this case. See Seawright v. Commissioner, 117 T.C. 294 (2001). - 40 - T

ascertaining the tax liability of the taxpayer. Sec. 7491(a)(1) applies to court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 726. The record indicates that the examinations of petitioners’ returns began prior to the effective date of sec. 7491. Thus, sec. 7491 is inapplicable to this case. See Seawright v. Commissioner, 117 T.C. 294 (2001). - 40 - T

f to the Commissioner if the taxpayer meets certain conditions, is effective for court proceedings arising in connection with examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Respondent began examining petitioner’s 1995 and 1996 Federal corporate income tax returns sometime in early 1997. Accordingly, sec. 7491 does not apply in the instant case. Unless indicated otherwise, all Rule references

tax liability, the Commissioner shall have the burden of proof with respect to that issue. Sec. 7491(a)(1). Section 7491 was added to the Code by - 11 - the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726, and is applicable in the case of court proceedings arising only in connection with examinations commencing after July 22, 1998, RRA 1998 sec. 3001(c), 112 Stat. 727. In the instant case, respondent selected petitioners’ 1996

this contention. The examination began before July 22, 1998. Sec. 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Thus, sec. 7491(a) does not apply, and petitioner bears the burden of proof on all issues in this case. Rule 142(a)(1). - 9 - return files for 1993. Those documents were not admitted in part because petitioner did not exc

is placed on the Secretary under certain circumstances. Section 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of.1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Respondent sent a letter to petitioner dated May 7, 1998, informing him that his 1996 Federal income tax return had been selected for examination. Absent any contrary evidence, we treat that date as the date respondent's

ec. 7491(a) places the burden of proof on the Commissioner in certain circumstances in court proceedings arising from IRS examinations beginning after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. By the same token, sec. 7491(c) places the burden of production on the Commissioner with respect to additions to tax. Sec. 7491(a) and (c) does not apply in this case because the examination of petitioners’ 1993, 1994, an

Commissioner. See sec. 7491(a)(1); Rule 142(a)(2). Sec. 7491 is effective with respect to court proceedings arising from examinations commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 685, 726. The parties have stipulated that respondent’s examination began in May 1996. Accordingly, sec. 7491 is inapplicable. 5 The asserted increase in the 1993 deficiency arises from two adjustments respondent made after

ec. 7491(a) for shifting the burden of proof to the Commissioner applies only to Court proceedings arising in connection with examinations commenced after July 22, 1998, Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. In the cases at hand, the notices of deficiency were issued on Oct. 7, 1996, and Nov. 19, 1997. We find that the examinations were commenced before July 23, 1998. Therefore, sec. 7491(a) does not apply to the cases at hand.

iped out before we can definitely fix the loss. If the assets of the corporation exceed its liabilities, the stock has a liquidating value. If its assets are less ¹ The Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491, which in certain circumstances places the burden of proof on respondent. Sec. 7491 is applicable, however, to court proceedings arising in connection with examinations commencing after July 22, 1998. Accordin

3; S. Rept. 105-174, at 45 (1998), 1998-3 C.B. 537, 581. Section 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. On September 11, 1996, respondent requested transcripts of reports from third parties showing amounts paid to petitioner. Absent contrary evidence, we infer from this fact that the examination in this case began before Ju

itures method. Petitioners produced no credible evidence of any nontaxable sources for the unexplained funds deposited into their banking accounts or the 2 The Internal Revenue Service Restructuring & Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491, which shifts the burden of proof to the Commissioner in certain circumstances. Sec. 7491 is applicable to court proceedings arising in connection with examinations commencing after July 22, 1998. See RRA

p return or Schedules 7 Sec. 7491, relating to the burden of proof, applies to court proceedings arising in connection with examinations beginning after July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), (c), 112 Stat. 685, 726. The examination here began before that date. Thus, sec. 7491 does not apply. - 9 - K-1 for 1993, as would have been required if it had been a partnership. Sec. 6031(a) and (b). Petitioner did not report any part

a) provides: “The burden of proof shall be upon the petitioner, * * * except that, in respect of any new matter, * * * it shall be upon the respondent.” 3 The Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 727, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. Sec. 7491 is applicable to “court proceedings arising in connection with examinations commencing after the date of the enactme

lace the burden on the Commissioner, the statute is effective only for - 11 - court proceedings that arise in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 727. Since the parties here stipulated that examination of the estate tax return at issue was initiated on October 28, 1997, section 7491 is inapplicable, and the estate’s references thereto on brief are misplaced. The bur

ny determination of penalties or additions to tax. Sec. 7491(c) applies only to court proceedings arising in connection with examinations commenced after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. The notice of deficiency in this case was issued on Feb. 26, 1997, which conclusively establishes that the examination was commenced before July 22, 1998. Because it is clear that sec. 7491(c) does not apply here, we need not

ir contention that respondent erred in determining that the addition to tax under section 6662(a) applies. The following sentence represents the extent of 16Section 7491(c), relating to burden of proof with respect to additions to tax, as enacted by sec. 3001 of the Internal Revenue Service Restructuring and Reform Act of 1998 (1998 Act), Pub. L. 105-206, 112 Stat. 685, 726, does not apply in the instant case because the examination in petitioners’ case began before July 22, 1998, the effective

ealy Power, Ltd. v. Commissioner, 46 F.3d 382, 386 (5th Cir. 1995), affg. in part, revg. in part on other grounds, and remanding in part T.C. Memo. 1992-168. 2 Internal Revenue Service Restructuring & Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726- 727, added sec. 7491, which places the burden of proof on the Commissioner in certain circumstances. Sec. 7491 is applicable to court proceedings arising in connection with examinations commencing after July 22, 1998. Se

line station gross receipts based on Lundberg Survey’s semimonthly listing of 9Sec. 7491(b), relating to burden of proof with respect to income reconstruction “solely through the use of statistical information on unrelated taxpayers”, as enacted by sec. 3001 of the Internal Revenue Service Restructuring and Reform Act of 1998 (1998 Act), Pub. L. 105-206, 112 Stat. 685, 726-727, does not apply to the instant case for two reasons, as follows: (1) Petitioner is a corporation and the provision appli

pra at 178; 31(...continued) were an integral plan and the determination of whether the principal purpose of the transactions was tax avoidance were inseparable). 32 Internal Revenue Service Restructuring & Reform Act of 1998 (RRA), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726-727, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. Sec. 7491 is applicable to "court proceedings arising in connection with examinations commencing after the date of the ena

ar at issue. Respondent's determination that 1 The examination of petitioner's return began before July 23, 1998. Therefore sec. 7491, which was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 685, 726, and which shifts the burden of proof to respondent in certain circumstances, does not apply to this matter. -4- petitioner is entitled to claim only the standard deduction is accordingly sustained. Decision will be e

Welch v. Helvering, 290 U.S. 111 (1933). Section 1366(a) generally allows shareholders of S corporations to take into account their pro rata share of the 15 Internal Revenue Service Restructuring & Reform Act of 1998 (RRA of 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726- 727, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. Sec. 7491 is applicable to "court proceedings arising in connection with examinations commencing after the date of the ena

Thus the issue is clearly joined: How essential are the participation requirements of section 3001 of ERISA to section 7476 of the Internal Revenue Code?

was in effect at any time relevant to these cases. Sec. 7491 is effective with respect to court proceedings arising from examinations commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 727. We question whether the “examination” in this case commenced after July 22, 1998, as required for sec. 7491 to apply. It appears obvious that at least with respect to 1987, 1990, and 1991, the examination commenced wel

nt factor in determining the validity of the agreement is the intent of the payor. Id. at 127. Petitioners contend that section 7491, which was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, shifts to respondent the burden of proof of the nature of the claim. Respondent, however, argues that petitioners have not satisfied the statutory requirements under section 7491 because petitioners neither cooperated with re

e record in this case establishes that the examinations of the 1995 and 1996 returns commenced before July 22, 1998, rendering sec. 7491 inapplicable to those years. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. As for 1997, (continued...) - 4 - For the reasons stated below, we hold that the notice of deficiency was timely as to the 1995 and 1996 tax years because it was issued within the 6-year period of limitations provided in

e record in this case establishes that the examinations of the 1995 and 1996 returns commenced before July 22, 1998, rendering sec. 7491 inapplicable to those years. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. As for 1997, (continued...) - 4 - For the reasons stated below, we hold that the notice of deficiency was timely as to the 1995 and 1996 tax years because it was issued within the 6-year period of limitations provided in

e record in this case establishes that the examinations of the 1995 and 1996 returns commenced before July 22, 1998, rendering sec. 7491 inapplicable to those years. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. As for 1997, (continued...) - 4 - For the reasons stated below, we hold that the notice of deficiency was timely as to the 1995 and 1996 tax years because it was issued within the 6-year period of limitations provided in

e record in this case establishes that the examinations of the 1995 and 1996 returns commenced before July 22, 1998, rendering sec. 7491 inapplicable to those years. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. As for 1997, (continued...) - 4 - For the reasons stated below, we hold that the notice of deficiency was timely as to the 1995 and 1996 tax years because it was issued within the 6-year period of limitations provided in

See generally 28 U.S.C. §§ 3001–3308. The U.S. Court of Appeals for the Ninth Circuit has concluded that the Act’s silence regarding judgment duration signals that judgments to which the Act applies last indefinitely, even if state law would impose a limitation. See United States v. Gianelli, 543 F.3d 1178, 1183 (9th Cir. 2008). The U.S. Co

e Tax, Additional Amounts, and Assessable Penalties".¹° What these terms have in common is that they refer to amounts that are assessed 8(...continued) 23, 1998, see Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, sec. 3001(c), 112 Stat. at 727, and the taxpayer in that case anyway bore the burden ofproofunderRule 142(a), see Matthews v. Commissioner, 92 T.C. at 361-362 (citing Rule 142(a), and Welch v. Helvering, 290 U.S. 111, 115 (1933)). Moreover, none ofth

111, 115 (1933); see also Rule 142(a).

111, 115 (1933); see also Rule 142(a).

) does not operate to shift the burden ofproof. 7Sec. 7491 is effective for court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, sec. 3001(a), 112 Stat. at 726. The record does not establish when the examination commencedthat gave rise to this case. Respondent does not allege that it commenced before July 22, 1998, and for this purpose we assume that it did not. - 9 - [*9] II.

; Deputy v. du Pont,3 308 U.S. 488, 495 (1940). 'Sec. 7491 is effective for court proceedings that arise in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of '1998, Pub. L. 105-206, sec. 3001(c), 112.Stat. 727. Even if, the. expenses reported on Schedule C are ordinarÿ and necessary, petition r has failed to adequately substantiate the claimed deductions. The record relating to the claimed deductions is limit d to petitioner's t

ague and ÜÊcert-ain. Fo'r irisEanEe, 'he could not say whether tihe , 4(...continued) taxable periods or events beginning or occurring. after the date of enactment . See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 683, 727. We infer that the effective-date provision has been satisfied from the IRS's acknowledgment that it audited Harris's 1995 tax return and the fact that -it argued about the substantive requirements, but not the effect

3001(c)(1), 112 Stat. 727. Because respondent’s examination of the Wieners’ returns began before July 22, 1998, (continued...) - 15 - Commissioner, 118 T.C. 106, 113 (2002), affd. 353 F.3d 1181 (10th Cir. 2003). Respondent concedes that petitioner meets the requirements of subparagraphs (A) and (E) of section 6015(b)(1). However, he argues th

438, 440-441 (2001). However, as the examination of the instant case began before the effective date of section 7491, July 22, 1998, section 7491(c) does not apply. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. Respondent asserts that petitioners bear the burden of production and the burden of persuasion on the penalty issues, and petitioners do not assert otherwise. - 15 - Respondent determined that petitioners are liable for the

in certain circumstances, this section is not applicable in this case because respondent’s examination of petitioner’s returns did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 28 - believes Ms. Cochran should have considered but that he was unable to produce because of the deadline for submission. Given the thoroughness and the amount of information submitted, it is unclear why petitioner nee

deadline for submission. Given the thoroughness and the amount of information submitted, it is unclear why petitioner needed additional time. We do not believe that Ms. Cochran 14(...continued) Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 35 - abused her discretion by establishing a timeframe for the section 6330 hearing and the submission of documents. 4. Efficient Collection Versus Intrusiveness Petitioner argues that respondent failed to balance the n

in certain circumstances, this section is not applicable in this case because respondent’s examination of petitioner’s returns did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 19 - Petitioner asserts that he was “initially only given four weeks” to provide all information. However, he ignores the fact that Ms. Cochran granted his requested extension and allowed him until April 6, 2004, to sub

in certain circumstances, this section is not applicable in this case because respondent’s examination of petitioners’ returns did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 32 - to be considered. Petitioners argument is not supported by the record. Petitioners assert that they were “initially only given weeks” to provide all information. However, they ignore the fact that Ms. Cochran grant

in certain circumstances, this section is not applicable in this case because respondent’s examination of petitioners’ returns did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 34 - and the amount of information submitted, it is unclear why petitioners needed additional time. We do not believe that Ms. Cochran abused her discretion by establishing a timeframe for the section 6330 hearing and t

in certain circumstances, this section is not applicable in this case because respondent’s examination of petitioners’ returns did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 31 - to be considered. Petitioners’ argument is not supported by the record. Petitioners assert that they were “initially only given weeks” to provide all information. However, they ignore the fact that Ms. Cochran gran

ed, it is unclear why petitioners needed additional time. We do not believe that Ms. Cochran abused her discretion by establishing a deadline for the submission of information. 16(...continued) Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 21 - 4. Mrs. Freeman’s Pending Innocent Spouse Claim At the time of the section 6330 hearing, Mrs. Freeman had an innocent spouse case pending before the Tax Court at docket No. 18985-02 for her 1980 through 1986 and 199

shifts the burden of proof to the Commissioner, is inapplicable because the examination in this case began before July 22, 1998, the effective date of that section. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. _ 4 _ expanded its trading activities to include trading a few additional over-the-counter stocks, convertible bonds, and preferred stocks, and (2) began to act as a "broker's broker" (i.e., trading with other broker-deal

1 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. -6- to shift the burden of proof under section 7491(a), and the burden therefore remains with petitioner. II. Taxability of Payments Petitioner Received From the Tribe Respondent determined that the amounts petitioner rec

is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. -16- motion to quash a summons that respondent had issued to obtain certain documents from the estate. We disagree. Based on our review of the record and petitioners’ arguments, we find that the estate had a good faith bel

in certain circumstances, this section is not applicable in this case because respondent’s examination of petitioner’s returns did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 16 - valuation or adjusted basis”. Sec. 6662(e)(1)(A). In other words, there is a gross valuation misstatement when the value or basis claimed on a return is 400 percent or more of the correct value or basis. Respondent

is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. -16- motion to quash a summons that respondent had issued to obtain certain documents from the estate. We disagree. Based on our review of the record and petitioners’ arguments, we find that the estate had a good faith bel

07 (1935). The parties do not discuss the burden of proof. Because the notice of deficiency was issued in 1994, i.e., before July 22, 1998, sec. 7491 does not apply. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. - 15 - Petitioner offered no evidence showing that respondent’s determination was erroneous.5 We conclude that petitioner’s deficiency for 1985 is the amount that respondent determined. D. Whether Petitioner Is Liable for

), because respondent initiated the examination of petitioners’ returns for the years at issue in October 1997, which is before the July 22, 1998, effective date of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. -9- INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Second, deductions are a matter of legislative grace, and the taxpayer must show that he or she is entitled to any deduction claimed. Rule 142(a); Deputy v. du Pon

3 More broadly speaking, we are asked to 3Petitioner has the burden of proof because the examination commenced before July 22, 1998, the effective date of sec. 7491. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 14 - decide whether a creditor may deduct a bad debt where the creditor’s actions contributed to the debtor’s default. We proceed by explaining the general legal principles surrounding partial bad debt deductions under

has satisfied certain requirements. Section 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 727. Respondent concedes that the examination in these cases began after July 22, 1998. Specifically, section 7491(a)(1) provides: If, in any court proceeding, a taxpayer introduces credible evidence with respect to any factu

2d 1158 (1st Cir. 1973); cf. Estate of Abraham v. Commissioner, supra at 39; Estate of Maxwell v. Commissioner, 98 T.C. at 602. Section 7491 was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, effective for court proceedings arising from examinations commencing after July 22, 1998. Section 7491(a)(1) provides that the burden of proof is on the Commissioner in specified circumstances. While petitioner makes no a

1994. We find that respondent's examination of petitioner's taxable year 1994 began before July 23, 1998, and that sec. 7491 is not applicable in the instant case. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. % - 10 - THROUGH HER. The check for these funds was issued jointly to Petitioner AND Mr. Ober; Petitioner did not have exclusive control of these funds at any time. Further, Petitioner relied upon reasonable sources includ

scussed below, petitioners’ arguments are unpersuasive. Section 7491 applies to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 727. The record in these cases establishes that respondent’s examination of the Roses’ joint income tax returns began before July 22, 1998. Furthermore, the record in these cases negates reasonable cause. The Roses conceded

is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. -16- motion to quash a summons that respondent had issued to obtain certain documents from the estate. We disagree. Based on our review of the record and petitioners’ arguments, we find that the estate had a good faith bel

in certain circumstances, this section is not applicable in this case because respondent’s examination of petitioner’s returns did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 20 - 3. Efficient Collection Versus Intrusiveness Petitioner argues that respondent failed to balance the need for efficient collection of taxes with the legitimate concern that the collection action be no more intrusiv

ds required under this title and has cooperated with reasonable requests.by the Secretary for witnesses, information, documents, meetings, and interviews; * * * See also Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, regarding - 10 - effective date. Section 7491 is applicable here in that examination of the estate tax return began after July 22, 1998. With respect to the deficiency determinations in dispute, the operative rules are co

ustment in the notice of deficiency. 7 The examination in this case commenced in November 1997. Consequently, the burden of proof rule of sec. 7491(a)(1) does not apply. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 10 - treatment, provided generally that the taxpayer identifies the new property within 45 days and receives it within 180 days of transferring the old property. See sec. 1031(a)(3). To facilitate such a deferred exchan

shifts to the Commissioner under certain circumstances. 7 Sec. 7491 applies to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. It appears that the examination of petitioners’ 1997 tax return commenced after the effective date of sec. 7491. - 8 - Petitioners have neither alleged that section 7491(a) applies nor established their compliance with th

ection 7491 is applicable to this case because the examination in connection with this action was commenced after July 22, 1998, the effective date of that section. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 - 11 - Stat. 727. Under section 7491, the burden of proof shifts from the taxpayer to the Commissioner if the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the taxpayer’s tax liabil

Allen v. Commissioner, 72 T.C. 28, 33 (1979); sec. 1.183-2(a), Income 3Sec. 7491 applies to examinations commencing after July 22, 1998, and therefore applies here. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. -9- Tax Regs. We give greater weight to objective facts than to a taxpayer’s statements of intent. Dreicer v. Commissioner, supra at 645; sec. 1.183-2(a), Income Tax Regs. We structure our analysis around nine nonexclusive f

Section 7491 is applicable to this case because the examination in connection with this action was commenced after July 22, 1998, the effective date of that section. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 727. Under section 7491, the burden of proof shifts from the taxpayer to the Commissioner if - 9 - the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the taxpayer’s tax liabil

7491 is applicable to this case because the examination in connection with this action was commenced after July 22, 1998, the effective date of that section. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. - 9 - 105-206, sec. 3001(c)(1), 112 Stat. 727. Under section 7491, the burden of proof shifts from the taxpayer to the Commissioner if the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the taxpayer’s tax liability. Se

ntiate items, maintain records, and cooperate fully with 3 Sec. 7491 applies to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. It appears that the examination of petitioner’s 1997 tax return commenced after the effective date of sec. 7491. - 5 - respondent’s reasonable requests. For similar reasons, section 6201(d) does not apply to place on resp

it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3).” Sec. 5 Sec. 7491(a) was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, effective for court proceedings arising from examinations commencing after July 22, 1998. Sec. 7491(a)(1) provides that the burden of proof shifts to the Commissioner in specified circumstances. We need not and do not dec

pra. Section 7491(a) modifies the general rule regarding the burden of proof in court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 727. When a taxpayer has introduced credible evidence with respect to a factual issue relevant to his liability for tax, section 7491(a) may shift the burden from the taxpayer to the Commissioner. As a prerequisite for shif

need not be 6 Sec. 7491(a) shifts the burden of proof to the Commissioner in some circumstances for cases involving examinations that commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 stat. 726. -18- reasonable, there must be a good faith objective of making a profit. Allen v. Commissioner, 72 T.C. 28, 33 (1979); sec. 1.183-2(a), Income Tax Regs. We give greater weight to objective facts than to a taxpayer's stateme

mmissioner, 77 T.C. 881, 889 (1981). 6Sec. 7491 does not apply to this case because the examination of petitioner's 1990, 1991, and 1992 returns began before July 22, 1998. See Internal Revenue Service Restructuring and Reform Act, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. The audit was subsequently expanded to include petitioner's 1993 tax year. - 24 Therefore, respondent bears the burden of proving that: (1) Petitioner had unreported income in each of 1990, 1991, 1992, and 1993 of $3,000 b

nda Hazlett, who acted under his direction and control, set up and controlled Blackbird Investments and its corporate trading account. He and Ms. Ford received $1,750,000 from the Maryland Bank in Luxembourg, secured 4(...continued) Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, effective for court proceedings arising from examinations commencing after July 22, 1998. Sec. 7491(a)(1) provides that the burden of proof shifts to the Commissioner in specified circumstances. Petitioners make no argume

s principle would not be affected by sec. 7491(a) even if it applied to this case, which it does not because sec. 7491 applies to examinations begun post-July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. Sec. 7491 would not shift the burden of proof to respondent because Mr. Runkle failed to comply with the substantiation requirements and failed to maintain adequate records. See sec. 7491(a)(2)(A) and (B); see also Higbee

r source derived absent a specific statutory exclusion, is to be broadly construed. Commissioner v. Glenshaw 3 Sec. 7491(a) was added to the Internal Revenue Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, effective for court proceedings arising from examinations commencing after July 22, 1998. Sec. 7491(a)(1) provides that the burden of proof shifts to the Commissioner in specified circumstances. Petitioner makes no argument

1 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. -12- While fair market value is a question of fact to be determined from the entire record, we were presented with four valuations of the subject property. See Zmuda v. Commissioner, 79 T.C. 714, 726 (1982), affd. 731 F.2

ation of their 1993, 1994, and 1995 returns. Because respondent’s examination of petitioners’ returns began before July 22, 1998, section 7491 does not apply. See Internal Revenue Service Restructuring and Reform Act of - 9 - 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Respondent’s determinations in the notice of deficiency are presumed correct, and petitioners bear the burden of proving that respondent’s determinations are incorrect. Rule 142(a)(1). Respondent has the burden of proof by

on in any court proceeding with respect to the liability of any individual for any penalty, addition to tax, or additional amount imposed by this title. - 15 - See also Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, regarding effective date. Section 7491 is applicable here in that examination of petitioner’s 1996, 1997, and 1998 tax years began after July 22, 1998. With respect to the deficiency determinations in dispute, the operativ

pra. Section 7491(a) modifies the general rule regarding the burden of proof in court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 727. When a taxpayer has introduced credible evidence with respect to a factual issue relevant to his liability for tax, section 7491(a) may shift the burden from the taxpayer to the Commissioner. As a prerequisite for shif

1 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. - 7 - is entitled to the deductions. Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976); sec. 1.6001-1(a), (e), Income Tax Regs. If a taxpayer establishes that he or she

1 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. 5Petitioner relies on the footnote to the Senate report on sec. 7491 to argue that he should still be entitled to shift the burden of proof because his records were lost through no fault of his own. See S. Rept. 105-174 a

)). Except for the items raised as new matter in respondent’s amendment to answer, we conclude that petitioner bears the burden 83 Sec. 7491 was added to the Code in the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, and is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. The parties agree that the examination in these cases commenced after July 22, 1998. -115- of proof w

ased on appointment books, calendars, or narrative summaries. Id. Although the 5Sec. 7491 applies to examinations commencing after July 22, 1998, and therefore applies here. See Internal Revenue Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. - 8 - regulations are vague, they do not allow a post-event “ballpark guesstimate”. Fowler v. Commissioner, T.C. Memo. 2002-223. In testimony and exhibits, petitioner wife produced credible evidence to establish that she met

1 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. -12- While fair market value is a question of fact to be determined from the entire record, we were presented with four valuations of the subject property. See Zmuda v. Commissioner, 79 T.C. 714, 726 (1982), affd. 731 F.2

ons under section 162,6 and fails to show error in respondent’s determination that Port of Mystery was an activity not engaged in for profit, then section 183 limits 5The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(a), which is applicable to Court proceedings arising in connection with examinations commencing after July 22, 1998. Under sec. 7491(a), Congress requires the burden of proof to be placed on the Commissioner,

percent of adjusted gross income. Sec. 165(h). The amount of the loss 1Sec. 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by sec. 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 685, 726. - 5 - allowed as a deduction is the lesser of: (1) The fair market value of the property immediately before the loss, or (2) the a

Discussion Because petitioner failed to meet the requirements of section 7491(a)(2), the burden of proof does not shift to respondent in this case.1 Section 183(a) generally provides that if an activity engaged in by an individual is not entered into for profit, no deduction attributable to the activity shall be allowed, except 1Sec.

se respondent issued the notice to petitioners on Mar. 20, 1998, and a fortiori the examination of the years involved here would have commenced before July 23, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 13 - estate and from personal property leased with the real estate * * * together with the deductions attributable thereto * * * except that the preced- ing provisions of this paragraph shall not apply to any income der

r in certain circumstances, this section is not applicable in this case because respondent's examination of petitioner's return did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 25 - the promissory notes. This trust continued even when the Hoyt organization switched petitioner's investment from partnership to partnership, at times without notifying petitioner or verifying the status ·of the pro

siness as an "investment banker" by attending Kellogg for 2 years, she 1Sec. 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by sec. 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 726. - 6 - alleges, and her master's degree expenses were incurred to maintain and improve her skills. In the alternative, she asserts that

v. Commissioner, 116 T.C. 438, 446-447 (2001). 5Sec. 7491(a) generally applies to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. 6Sec. 7491(c) provides that “Notwithstanding any other provision of this title, the Secretary shall have the burden of production in any court proceeding with respect to the liability of any individual for any penalty, ad

(1992); Welch v. Helvering, 290 U.S. 111, 115 (1933). However, the foregoing rule is subject to the provisions of section 7491, which was enacted as part of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, - 14 - sec. 3001(c), 112 Stat. 727. By virtue of section 7491(a), the burden of proof may, under certain circumstances, be shifted to the Commissioner. In the present case, section 7491(a) does not operate to place the burden of proof on respondent because:

ort income under section 7872 for the 1997 tax 15Sec. 7491 is effective for court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. The notices are dated May 22, 2001. The parties have not informed us whether the examination commenced on or before July 22, 1998, and neither party addressed this issue. Because Mr. Cutts’s 1997 return was filed on Oct. 19,

of Directors meeting”. However, Search2000 was not incorporated 2Sec. 7491 does not apply in this case because the underlying examination began before July 22, 1998, see Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, when petitioners were notified by letter dated July 16, 1997, that their application for tentative refund was under examination. We note that, had sec. 7491(a) applied, it would not have shifted the burden of proof to res

ds required under this title and has cooperated with reasonable requests by the Secretary for witnesses, information, documents, meetings, and interviews; * * * See also Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, regarding effective date. Section 7491 applies here in that the examination of a 2000 tax return began after the statute’s effective date. However, legislative history makes clear that the burden will be shifted to the Co

may shift to the Commissioner. Because petitioners failed to meet the 3Sec. 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by sec. 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 685. - 7 - requirements of section 7491(a)(2), the burden of proof does not shift to respondent in this case. Respondent's determinations ar

dure. 3Sec. 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, was enacted. Although the examinations for these cases began on Aug. 5, 1999, for 1996 through 1998 and on Apr. 4, 2002, for 1999 through 2000, these cases were submitted fully stipulated. Therefore, no facts are in dispute,

t the only issue under section 7491(a) was whether petitioners had presented credible evidence. We treat respondent’s representation at trial as a 26(...continued) 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. Respondent has conceded that the examination in this case commenced after July 22, 1998. - 43 - concession that petitioners have satisfied the requirements of section 7491(a)(2). The stipulated joint exhibits and petition

ort income under section 7872 for the 1997 tax 15Sec. 7491 is effective for court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. The notices are dated May 22, 2001. The parties have not informed us whether the examination commenced on or before July 22, 1998, and neither party addressed this issue. Because Mr. Cutts’s 1997 return was filed on Oct. 19,

n of proving that the Commissioner's determination of income tax deficiencies is incorrect. Welch v. Helvering, 290 U.S. 111, 115 (1933). Section 7491 was added under the Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105- 206, sec. 3001, 112 Stat. 685, 726. If certain requirements of section 7491 are met, the burden of proof with respect to factual - 4 - issues relevant to ascertaining the tax liability of the taxpayer may shift to the Commissioner. See Higbee v. Commissio

f an excise tax. In light of the [S]ixteenth [A]mendment, however, all 2Sec. 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by sec. 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 726. - 6 - taxation of income, "from whatever source derived," was found to be constitutional in Brushaber. [Martin v. Commissioner, 756 F.2

ment and refer to Massachusetts Mutual Life Insurance Company as the Company. - 6 - 1998, however, may operate in specified circumstances to place the burden on the Commissioner. Internal Revenue Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. With respect to factual issues and subject to enumerated limitations, section 7491(a) may shift the burden of proof to the Commissioner in instances where the taxpayer has introduced credible evidence. Concerning penalties

pt. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-995). 8Sec. 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. The year at issue is 1998, and the examination began after July 22, 1998. Thus, sec. 7491 applies to this case. - 16 - In this case, there are multiple factual issues relevant to determining petitioners’ tax liability. Pe

n to the Commissioner, is inapplicable in this case. Sec. 7491 applies only to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. Respondent’s examination of petitioners’ 1994 return began before Aug. 16, 1996, and their 1995 return was examined before Feb. 24, 1997. - 11 - and the losses reported on their income tax returns. Certain facts and circum

pt. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-995). 8Sec. 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. The year at issue is 1998, and the examination began after July 22, 1998. Thus, sec. 7491 applies to this case. - 16 - In this case, there are multiple factual issues relevant to determining petitioners’ tax liability. Pe

pt. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-995). 8Sec. 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. The year at issue is 1998, and the examination began after July 22, 1998. Thus, sec. 7491 applies to this case. - 16 - In this case, there are multiple factual issues relevant to determining petitioners’ tax liability. Pe

r in certain circumstances, this section is not applicable in this case because respondent's examination of petitioners' return did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 23 - did what a reasonably prudent person would have done under the circumstances. Bixby v. Commissioner, 58 T.C. 757, 791 (1972). III. Application of the Negligence Standard Although petitioners had no background in ca

production in any court proceeding with respect to the liability of any individual for any penalty, addition to tax, or additional amount imposed by this title. [See also Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, regarding effective date.] Section 7491 is applicable here in that the examinations in this case began after the statute's effective date. With respect to the income adjustments at issue, petitioner has not met the prereq

to the Commissioner in certain situations. However, this section is not applicable in this case because the underlying examination did not commence after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 23 - weight: The omission of petitioner's name could have been due to any of a number of reasons, such as an oversight by the person who prepared the Schedule K-1. In short, this document standing alone does not corrobo

shifts the burden of proof to the Commissioner, is inapplicable because the examination in this case began before July 22, 1998, the effective date of that section. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 4 - to Citicorp Mortgage, Inc. (CMI). Petitioner was delinquent on those debts (the CMI debts) at the time petitioner filed the bankruptcy petition, and CMI is listed as a secured creditor with respect to the CMI debts

f production in any court proceeding with respect to the liability of any individual for any penalty, addition to tax, or additional amount imposed by this title. See also Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, regarding effective date. Section 7491 is applicable here in that the examination in this case began after the statute’s effective date. With respect to the income adjustments at issue, petitioners have not met the prereq

r in certain circumstances, this section is not applicable in this case because respondent’s examination of petitioners’ return did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 24 - proving that respondent’s determination is erroneous and that he did what a reasonably prudent person would have done under the circumstances. See Rule 142(a); Hansen v. Commissioner, supra; Hall v. Commissioner, 7

ot apply in the instant case because the parties stipulated that the examination of petitioner’s tax returns began before July 22, 1998, the effective date of sec. 7491. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. - 9 - transactions, does not protect petitioner from taxation on the $100,000, citing James v. United States, 366 U.S. 213 (1961). Respondent also contends that petitioner’s 1996 fraudulent purpose contradicts petitioner’

0.5 In order to avoid imposition of the 4Sec. 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. The evidence in the record indicates that the examination in this case commenced after July 22, 1998. 5The computational adjustments to petitioner’s 2000 return (continued...) - 6 - penalty, petitioner must establish that

d to the Centurion. In order to prevail, petitioner must prove that determination wrong.5 Rule 142(a)(1); Welch v. Helvering, 5 Sec. 7491(a) was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, effective for court proceedings arising from examinations commencing after July 22, 1998. (continued...) - 11 - 290 U.S. 111, 115 (1933). Petitioner also bears the burden of proving its entitlement to any deduction claime

e dental practice income and that petitioners should be treated as if they filed separate returns as married persons. 7 Sec. 7491 was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726. Sec. 7491(a) applies with respect to examinations that are commenced after July 22, 1998. RRA 1998 sec. 3001(c), 112 Stat. 727. The record does not disclose when the examinations commenced in this case; however, with respect

so defined, for each of those years exceeded $500. Those stipulations also preclude the applicability of the section 6654(e)(2) exception (zero tax for preceding year) to 1996 and 1997. However, nothing in the record 6(...continued) Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 727. In his brief, respondent concedes that his examination of petitioner’s 1995, 1996, and 1997 taxable years (i.e., the years remaining at issue) commenced after July 22, 1998. 7 The stipulation of settled issues categori

because respondent issued the notice to petitioners on Jan. 22, 1998, and a fortiori the examination of the years at issue would have commenced before July 23, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 11 - estate and from personal property leased with the real estate * * * together with the deductions attributable thereto * * * except that the preced- ing provisions of this paragraph shall not apply to any income der

applies. We disagree. The NOL at issue, if in fact incurred, was incurred well before the effective date of the 20-year rule. 3 Sec. 7491(a) was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, effective for court proceedings arising from examinations commencing after July 22, 1998. Sec. 7491(a)(1) provides that the burden of proof shifts to the Commissioner in specified circumstances. Petitioner makes no argume

n certain circumstances, this section is not applicable in these cases because respondent’s examination of petitioners’ returns did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. I. Farming Losses and General Business Credits Taxpayers are required to maintain records sufficient to establish the amounts of income, deductions, and other items which underlie their Federal income tax liabilities. Sec

n certain circumstances, this section is not applicable in these cases because respondent’s examination of petitioners’ returns did not commence after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. I. Farming Losses and General Business Credits Taxpayers are required to maintain records sufficient to establish the amounts of income, deductions, and other items which underlie their Federal income tax liabilities. Sec

Section 7491 is effective with respect to Court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by section 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.

pplies to this case to shift the burden of proof and/or production. Sec. 7491 applies to court proceedings arising from examinations commencing after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998 (RRA), Pub. L. 105- 206, sec. 3001, 112 Stat. 726. It would appear that the examination for 1997 commenced after that date. With regard to the burden of proof under sec. 7491(a), petitioners have not satisfied the requirements of that section. Under sec. 7491(c) respondent h

Section 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by section 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.

liability for the accuracy-related penalty under section 6662(c) because the examination in this case commenced after July 22, 1998, the effective date of section 7491. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. Petitioner erroneously failed to include in his gross income the $1,568,087 qui tam payment. Thus, respondent has met the burden of production. H. Conf. Rept. 105-599, at 241 (1998), 1998-3 C.B. 747, 995. 2. Petitioner’s

that respondent’s examination commenced after July 22, 1998. Because sec. 7491 applies only to court proceedings arising from examinations commencing after July 22, 1998, Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, we conclude that neither sec. 7491(a) nor (c) applies here to place the burden of proof and/or production upon respondent. See Eddie Cordes, Inc. v. Commissioner, T.C. Memo. 2002-125 n.13; Peacock v. Commissioner, T.C. Memo.

shifts the burden of proof to the Commissioner, is inapplicable because the examination in this case began before July 22, 1998, the effective date of that section. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. 2 Petitioner has failed to set forth objections to respondent’s proposed findings of fact. Accordingly, we conclude that petitioner concedes that respondent’s proposed findings of fact are correct except to the extent tha

us, we find that respondent has met his 9Sec. 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. The evidence in the record does not indicate when the examination commenced in this case; however, the due dates, without extensions, for filing petitioner’s returns for 1998 and 1999 were after July 22, 1998. Accordingly

esult from willful neglect and that the failure was due to reasonable cause. Higbee v. Commissioner, 116 T.C. 438, 447 (2001). 8Sec. 7491(c) was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. 9The addition to tax is equal to 5 percent of the amount of the tax required to be shown on the return if the failure to file is not for more than 1 month. An additional 5 percent is imposed for each month or fraction thereo

Section 7491 is effective with respect to Court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by section 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.

s, Congress knew that GAAP did not explicitly require mark-to-market accounting 62 The first legislative precursor of sec. 475 was sec. 372 of the Economic Growth Act of 1992 (H.R. 4150). H. Rept. 102-4150 (1991). H.R. 4150 was not enacted. However, sec. 3001 of the Revenue Bill of 1992, H.R. 11, 102d Cong. (1992), contained similar language. H.R. 11 passed both houses of Congress but was vetoed by the President. -194- for nonmarketable securities. Congress also was told that, in the case of ins

sioner, 990 F.2d 893, 898 (6th Cir. 1993), affg. Donahue v. Commissioner, 4 References to sec. 7491 are to that section as added to the Internal Revenue Code by the Internal Revenue Service Restructuring & Reform Act of 1998 (RRA), Pub. L. 105-206, sec. 3001, 112 Stat. 726-727. Sec. 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. RRA sec. 3001(c), 112 Stat. 727. - 6 - T.C. Memo. 1991-181; Greenberg’s Express, Inc. v. Com

n for 1996 or 1997. On May 7, 1999, the Internal Revenue Service received from petitioner a Form 1040, U.S. Individual Income Tax Return, for his 1998 tax year. This document (the purported 1998 return) ¹(...continued) (IUUA 1998), Pub. L. 1.05-206, sec. 3001, 112 Stat. 726). Rule references are to the Tax Court Rules of Practice and Procedure. 2 Petitioner admits in his petition that he received those amounts of interest income. - 3 - lists on Schedule E, Supplemental Income and Loss, $32,683 o

ncorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). Sec. 7491 is inapplicable because the examination began before July 22, 1998, the section's effective date. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 726. $90,000 income reported) and $42,000 (i.e., $132,000 income received minus $90,000 income reported) relating to 1992 and 1994, respectively. III. Employment Status Respondent determined in the notice of deficiency th

the burden of proof or production on the Commissioner. Sec. 7491 applies to court proceedings arising in connection with tax examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Petitioners timely filed their returns for the years at issue. Hence, all of the returns were filed on or before Apr. 15, 1998. The record does not disclose when the examination of petitioners’ tax returns began, and it i

ons, does not apply in the instant case because the examination of petitioners’ tax returns began in 1996 or 1997, before the July 22, 1998, effective date of sec. 7491. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. - 74 - with respect to “new matter”, including increased deficiencies. Rule 142(a)(1). Because all of our redeterminations except fraud have been made on the basis of the preponderance of the evidence, it is not necessary

guments and reject those arguments not discussed herein as meritless. Decision will be entered under Rule 155. 4 Sec. 7491 does not apply to this case because the examination of petitioners’ tax return commenced before July 22, 1998, the effective date of that section. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726.

at 240 (1998), 1998-3 C.B. 755, 994). Section 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. The parties stipulated that the examination of petitioner’s 1996 Federal income tax return commenced after the effective date of section 7491, and petitioner has established that he made the $50,000 payment to Ms. Springe

sary to reach this issue, and we do not. 7 Effective for court proceedings arising in connection with examinations commencing after July 22, 1998, if certain requirements are met, sec. 7491(a) shifts the burden of proof to the Commissioner. RRA 1998 sec. 3001(a), 112 Stat. 726. Petitioner has neither alleged that sec. 7491(a) applies nor established that the preconditions to its applicability have been met. Moreover, because sec. 6015(b)(1)(C) specifically requires the relief-seeking spouse to e

re met, sec. 7491(a) shifts to the Commissioner the burden of proof with respect to factual issues relevant to ascertaining the tax liability of the taxpayer. Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Respondent asserts and petitioner does not dispute that respondent’s examination of petitioner’s 1996 gift tax return commenced in 1997. Accordingly, the burden-shifting provisions of sec. 7491(a) are inapplicable here. -

the burden of proof or production on the Commissioner. Sec. 7491 applies to court proceedings arising in connection with tax examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Petitioners timely filed their returns for the years at issue. Hence, all of the returns were filed on or before Apr. 15, 1998. The record does not disclose when the examination of petitioners’ tax returns began, and it i

of section 7491, which shifts the burden of proof to the Secretary under certain specified circumstances. B. Section 7491 Section 7491, enacted as part of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 727, is applicable to “court proceedings arising in connection with examinations commencing after the date of the enactment of this Act.” RRA 1998 sec. 3001(c). RRA 1998 was enacted on July 22, 1998, well before respondent’s issu

the burden of proof or production on the Commissioner. Sec. 7491 applies to court proceedings arising in connection with tax examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Petitioners timely filed their returns for the years at issue. Hence, all of the returns were filed on or before Apr. 15, 1998. The record does not disclose when the examination of petitioners’ tax returns began, and it i

rt proceedings that arise in connection with examinations commencing after July 22, 1998, may operate, however, in specified circumstances to place the burden on the Commissioner. Internal Revenue Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. With respect to factual issues and subject to enumerated limitations, section 7491(a) may shift the burden of proof to the Commissioner in instances where the taxpayer has introduced credible evidence. Concerning penaltie

ing the tax liability of the taxpayer, the burden of proof shifts to the Commissioner with respect to that issue. Section 7491(a) was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726. - 13 - Section 7491(a)(1) applies in court proceedings arising only in connection with examinations commencing after July 22, 1998.16 See RRA 1998 sec. 3001(c), 112 Stat. 727. Agent Daleiden’s first contact letter regarding

sary to reach this issue, and we do not. 7 Effective for court proceedings arising in connection with examinations commencing after July 22, 1998, if certain requirements are met, sec. 7491(a) shifts the burden of proof to the Commissioner. RRA 1998 sec. 3001(a), 112 Stat. 726. Petitioner has neither alleged that sec. 7491(a) applies nor established that the preconditions to its applicability have been met. Moreover, because sec. 6015(b)(1)(C) specifically requires the relief-seeking spouse to e

1 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. - 5 - substantiation, that such interest could have been reported in tax returns for prior taxable years. She did not produce any evidence that her U.S. savings bonds were issued at a discount or any evidence of an electi

ents are met under sec. 7491(a), the burden of proof shall be on the Commissioner as to any factual issue relevant to ascertaining the tax liability of the taxpayer. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. The examination in the instant case commenced after July 22, 1998. Nevertheless, neither party addresses whether the requirements of sec. 7491(a) have been met, and, in any event, we do not decide any factual issue on the

applies to court proceedings arising in connection with examinations commencing after July 22, 1998, the date of enactment of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, 112 Stat. 685. See RRA 1998 sec. 3001(c), 112 Stat 727. Respondent alleges that the examination in this case (continued...) - 5 - FINDINGS OF FACT6 Some facts are stipulated and are so found. The stipulation of facts, with accompanying exhibits, is incorporated herein by this r

s commenced before July 22, 1998. Consequently, sec. 7491(a), which in some circumstances may place the burden of proof on the Commissioner, has no application here. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 15 - (1995), affd. 121 F.3d 393 (8th Cir. 1997). For the taxable year at issue, personal injuries include both physical and nonphysical injuries. See Commissioner v. Schleier, supra at 329 n.4.5 If amounts are received

ing the tax liability of the taxpayer, the burden of proof shifts to the Commissioner with respect to that issue. Section 7491(a) was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726. - 13 - Section 7491(a)(1) applies in court proceedings arising only in connection with examinations commencing after July 22, 1998.16 See RRA 1998 sec. 3001(c), 112 Stat. 727. Agent Daleiden’s first contact letter regarding

the burden of proof or production on the Commissioner. Sec. 7491 applies to court proceedings arising in connection with tax examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Petitioners timely filed their returns for the years at issue. Hence, all of the returns were filed on or before Apr. 15, 1998. The record does not disclose when the examination of petitioners’ tax returns began, and it i

nder this title and has cooperated (continued...) -8- 7491(a)(1); Rule 142(a). Section 7491 is effective with respect to examinations commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. Although the relevant examination was conducted after July 22, 1998, petitioners failed to meet the requirements of section 7491(a)(1) and (2) in that they did not present any credible evidence with respect to any factual

heory upon which the Commissioner relies is not stated or 4 Sec. 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. In this case, the examination of petitioners’ returns began after July 22, 1998. Accordingly, sec. 7491 is applicable to this case. - 17 - described in the notice of deficiency and the new theory or basis requires the pre

the burden of production and/or proof under certain circumstances, does not apply in the present case because the underlying examination commenced prior to July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 8 - not all of the supporting documents are in the record, nothing in the record calls into question the accuracy of these summaries. Petitioner himself does not dispute their accuracy. In petitioner’s Objections to Resp

ese issues on a preponderance of the evidence. 4 Sec. 7491 is effective for Court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. - 7 - By determining a penalty under section 6662(a), respondent had the “burden of production * * * with respect to the liability of any individual for any penalty”. Sec. 7491(c). Because we have decided that petitioners

o the Commissioner in certain circumstances, the section is applicable only to court proceedings that arise in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. It is apparent from the record in this case that the examination commenced prior to July 22, 1998, and, therefore, section 7491 has no application. Courts have recognized a limited exception to the general rule where the

the burden of proof to the Commissioner in certain circumstances, is not applicable here because the examination of Indeck’s return commenced prior to July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 726. - 23 - shares and the arbitrator’s award of interest at 10-percent per annum on $15,030,000 commencing January 31, 1991. Indeck further cites Mr. Polsky’s attorneys’ representations to the Lake County Circuit Court--wh

ies do not raise the issue, and the record does not indicate when respondent’s examination of petitioner’s 1996 corporate Federal income tax return began. See sec. 7491; Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726 (providing that July 22, 1998, is the effective date of sec. 7491). In any event, resolution of this case does not hinge on placement of the burden of proof. - 9 - creditor relationship. Litton Bus. Sys., Inc. v. Commissio

count holders, petitioner contends that the bank accounts did 7Respondent’s examination in this case commenced before July 22, 1998, the effective date of sec. 7491. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 8 - not belong to him exclusively. Petitioner insists that he and his partners, Mr. Ridge8 and Mr. Dill, shared the bank accounts and the funds deposited into them. We find no support in the record for this assertion. P

1 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of enactment by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. - 5 - returned the proceeds to Automotive Emporium as an accommodation.2 The classification of the amount reported by Automotive Emporium as nonemployee compensation depends upon whether petitioner is a common law employe

o the Commissioner in certain circumstances, the section is applicable only to court proceedings that arise in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 727. It is apparent from the record in this case that the examination commenced prior to July 22, 1998, and, therefore, section 7491 has no application. Courts have recognized a limited exception to the general rule where t

the burden of proof or production on the Commissioner. Sec. 7491 applies to court proceedings arising in connection with tax examinations beginning after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. Petitioners timely filed their returns for the years at issue. Hence, all of the returns were filed on or before Apr. 15, 1998. The record does not disclose when the examination of petitioners’ tax returns began, and it i

of 1997, Pub. L. 105-34, sec. 1202(a), 111 Stat. 994. 9 Sec. 7491(c) applies to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 727. As referenced in our findings of fact, the additions to tax not included in the default motions (collectively, the remaining additions to tax) pertain to examinations commenced after July 1998. - 21 - 142(a); cf. curre

nt with respect to that factual issue. 11Sec. 7491(a), which is titled “Burden Shifts Where Taxpayer Produces Credible Evidence”, was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726. Sec. 7491(a) applies with respect to examinations that are commenced after July 22, 1998. RRA 1998 sec. 3001(c), 112 Stat. 727. The examination in this case commenced at some point after July 22, 1998. 12As relevant herein,

Section 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by section 3001(a) of the Internal Revenue Service Restructuring and Reform Act of - 7 - 1998, Pub.

157, provides that a transfer of a participant’s IRA funds directly from one trustee 12 Sec.

ial, petitioner conceded unreported income amounts of $1,503 and $748, consisting, respectively, of a State income tax refund and unemployment compensation benefits. 3 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491, which, under certain circumstances, places the burden of proof on the Secretary with respect to any factual issue relevant to a taxpayer's liability for taxes in court proceedings arising in connection with

Section 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by section 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.

xpenses, however, specifically including meals and lodging while away from home, as well as in the case of entertainment expenses and expenses with respect to listed 3 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491, which, under certain circumstances, places the burden of production on the Secretary with respect to a taxpayer’s liability for taxes, penalties, and additions to tax in court proceedings arising in connecti

Section 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by section 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.

ection with additions to tax and penalties, sec. 7491(c) places a burden of production on the Commissioner in cases involving examinations commenced after July 22, 1998. Internal Revenue Service Restructuring and Reform.Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. Neither party offered evidence to show when the audit was commenced. However, respondent claimed in his pretrial memorandum that the audit was commenced before July 23, 1998, and petitioner in its opening brief appeared to a

Section 7491 is effective with respect to court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by section 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.

an eviction proceeding for an 3 Sec. 7491 does not apply to this case because the examination commenced prior to July 22, 1998, the effective date of that section. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 726. - 20 - apartment she had rented, and then revealed a familiarity with minute details regarding the proceeding when cross-examining witnesses. In addition, on at least one occasion petitioner sought to have a document ad

ity of California -- illegally -- cancelled our life insurance (including irreplaceable term life), cancelled my lifetime employment contract, said our savings (held 4 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491, which, under certain circumstances, places the burden of proof on the Secretary with respect to factual issues relevant to a taxpayer's liability for taxes and the burden of production on the Secretary with

e claimed dependent is a child of the taxpayer under the age of 19 (24 if the child is a student). The exemption amount for 1997 is $2,650. Rev. Proc. 96-59, 1996-2 2The Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. Sec. 7491 is applicable to court proceedings arising in connection with examinations commenced after July 22, 1998. Petitioner

l, gains are included within the 3¹ Sec. 7491 does not apply to this case because the examination commenced before July 22, 1998, the effective date of that section. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 727. - 49 - definition of gross income. James v. United States, 366 U.S. 213 (1961) (money obtained from embezzlement); Rutkin v. United States, supra (money obtained by extortion); Leaf v. Commissioner, 33 T.C. 1093 (1960)

missioner, 754 F.2d 921, 923 (11th Cir. 1985) (citing Jackson v. Commissioner, 73 T.C. 394, 401 (1979)), affg. T.C. Memo. 1982- 489. Section 7491, enacted as part of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, which can shift the burden of proof from the taxpayer to the Commissioner, is not applicable to this case because petitioners’ audit commenced in April 1998, which predates July 22, 1998, the effective date of section 7491.

records, and fully cooperate with the Secretary’s reasonable requests. Sec. 7491 is effective with respect to Court proceedings arising in connection with examinations by the Commissioner commencing after July 22, 1998, the date of its enactment by sec. 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 726. Petitioner’s return for the 2000 year was filed timely after the effective date of sec. 7491; therefore, the examination necessarily co

r. See sec. 7491(a); Rule 142(a)(2). Sec. 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 685, 726. Here, respondent’s examinations of Beech Trucking’s 1995 and 1996 Federal income tax returns commenced before July 23, 1998. Accordingly, sec. 7491 has no application to this case. 30 In particular, the record doe

Section 32(d) provides: “In the case of an individual who is married (within the meaning of section 7703), this section shall apply only if a joint return is filed for the taxable year under section 6013.” Since the Court has concluded that petitioner was considered married in 1998, and no joint return was filed for that year, petitioner is not entitled to the earned income credit.

Weinstein and the Attiehs and 18 Sec. 7491 does not apply to this case because the examination commenced prior to July 22, 1998, the effective date of that section. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 726. - 31 - petitioner indicate that the parties to the loans intended genuine debts. See id. In order to be entitled to a bad debt deduction, petitioner must prove that each debt had value at the beginning of 1994 and becam

are not deductible as ordinary and necessary business expenses under section 162 if they fail to qualify as legitimate business 5 Sec. 7491 was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, effective for court proceedings arising from examinations commencing after July 22, 1998. Sec. 7491(a) provides that the burden of proof shifts to the Commissioner in specified circumstances. Petitioners make no argument t

. Commissioner, 118 T.C. 106, 125 (2002) . In ny event the ïecord establishes that respondent's examination of the 1995 joint return commenced in 1997. See sec. 7491(a) ; Int rnal Revehue Service Restructuring and Reform Act of 1998 Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. t In the instant case, the parties asree that relief is not available to petitioner under section 6015 (b) or (c) , thereby satisfying section 6015 (f) (2) 2° We turn first to a dispute between the parties as to the scope

yer has the burden of proving that the addition is improper. Rule 142(a); United States v. Boyle, 469 U.S. 241, 245 (1985).3 Petitioner stated that he did not file a 3 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(c), which places the burden of production on the Secretary with respect to a taxpayer's liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing aft

.2d 540, 543-544 (2d Cir. 1930). Any such estimate, however, must have a reasonable evidentiary basis. Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985). Without 4 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491, which, under certain circumstances, places the burden of production on the Secretary with respect to a taxpayer’s liability for taxes, penalties, and additions to tax in court proceedings arising in connectio

ome tax return, unless it is shown that such failure is due to reasonable cause and not due to willful neglect. United States v. Boyle, 469 U.S. 241, 245 (1985). A 2The Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491(c), which places the burden of production on the Secretary with respect to a taxpayer’s liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing

ommencing after July 22, 1998, under sec. 7491(c) respondent bears the burden of production with respect to an individual’s liability for any penalty or addition to tax. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. In any case in which there is no examination, sec. 7491(c) applies to court proceedings arising in connection with taxable periods or events beginning or occurring after July 22, 1998. Id. It is reason- able to assume tha

Commissioner, 67 T.C. 111, 131 (1976). 15The burden of proof provisions of sec. 7491 do not apply here because the examination in this case began before July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. - 27 - Section 6651(a) authorizes the Commissioner to impose an addition to tax whenever a taxpayer fails to file a required return when due (determined with regard to any extension of the filing deadline) unless the taxpaye

sioner in specified circumstances, is inapplicable to this case. Sec. 7491(a) applies only to court proceedings arising from examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 14 - provided those funds and that the disputed transactions increased their basis in Ram. The decided cases have established certain principles concerning when a shareholder may claim increased basis in an S corporatio

ceedings arising in connection with examinations commencing after July 22, 1998, under sec. 7491(a) the burden of proof shifts to respondent in specified circumstances. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. The record in this case does not establish the date on which the examination of each of petitioners’ taxable years at issue began, and neither party contends that sec. 7491(a) applies here. With respect to court proceeding

onial Ice Co. v. Helvering, 292 U.S. 435 (1934); Welch v. Helvering, 290 U.S. 111 (1933). If petitioner fails to establish LFI’s entitlement to the deductions under 13The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(a), which is applicable to court proceedings arising in connection with examinations commencing after July 22, 1998. Under sec. 7491, Congress requires the burden of proof to be placed on the Commissioner, sub

with regard to certain factual issues. Section 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 727. The examination in the instant case began in December 1998. Therefore we evaluate whether respondent bears the burden of proof pursuant to section 7491. Section 7491(a)(1) provides that if, in any court proceeding, the

ayer for penalties and additions to tax. Sec. 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. Russell and Clarice have introduced no evidence to establish whether the examination in this case commenced after July 22, 1998, and, consequently, they have failed to show that sec. 7491 applies. Eddie Cordes, Inc. v. Co

ssue. Sec. 7491(a); Rule 142(a)(2). Section 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 726. The examination in the instant case began after July 22, 1998. Petitioners contend that the burden of proof is therefore on respondent. Respondent disagrees, contending that petitioners have failed to introduce credibl

petitioner’s analysis of the factors and of ZSI’s worth yielded a value nearly half that which respondent’s appraisal yielded.8 The parties identified, and the Court 7The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(a), which is applicable to court proceedings arising in connection with examinations commencing after July 22, 1998. Under sec. 7491, Congress requires the burden of proof to be placed on the Commissioner, sub

ayer for penalties and additions to tax. Sec. 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. Russell and Clarice have introduced no evidence to establish whether the examination in this case commenced after July 22, 1998, and, consequently, they have failed to show that sec. 7491 applies. Eddie Cordes, Inc. v. Co

of proof on the Secretary. Sec. 7491(a). Sec. 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. The examination in this case commenced in January 1997; thus, sec. 7491 is not applicable. - 9 - expenditures. Sec. 263(a); INDOPCO, Inc. v. Commissioner, supra at 83. “A particular cost, no matter what its type, may be d

was a loan. Section 7491 applies only to court proceedings arising in connection with examinations commencing after July 22, 1998 and thus does not apply to this case. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 726, 727. In any event, as set forth below, we do not accept petitioner’s testimony as credible. Petitioners further argue that respondent must put forth evidence that the cash transaction was not a loan and must show some link

as claimed. - 4 - Section 7491(a) places the burden of proof on respondent with regard to certain factual issues. Section 7491 applies to examinations commencing after July 22, 1998. Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726. Upon reviewing the record, it is unclear when the examination of petitioner’s 1997 return commenced. Further, neither party raised the issue of whether section 7491(a) applies here. However, under section 7491(a)(2)(B), the b

Commissioner, 67 T.C. 111, 131 (1976). "The burden of proof provisions of sec. 7491 do not apply here because the examination in this case began before July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. - 27 - Section 6651(a) authorizes the Commissioner to impose an addition to tax whenever a taxpayer fails to file a required return when due (determined with regard to any extension of the filing deadline) unless the taxpaye

inations commenced after July 22, 1998, the Commissioner bears the burden of producing sufficient evidence to indicate that it is appropriate to impose any additions to tax provided for in the Internal Revenue Code. Sec. 7491(c), enacted by RRA 1998 sec. 3001, 112 Stat. 726; Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). Where no examination has been conducted, the provisions of section 7491(c) apply to court proceedings that arise in connection with taxable periods or events beginning or

nformation, documents, meetings, and interviews; * * *. 4 Sec. 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 726. The examination in this case began after July 22, 1998. Thus, sec. 7491 applies. - 9 - use of the bank deposits method to reconstruct his income for 1996 and 1997. Petitioner contends that he had the following nontaxable

has jurisdiction to determine the amount of 4The burden of proof provisions of sec. 7491 do not apply here because the examination in this case began before July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. - 5 - the overpayment, and the overpayment amount must be credited or refunded to the taxpayer after the decision has become final. Section 6512(b)(3) limits the amount of the credit or refund, however. Section 6512(b)(3) pr

ft the burden of proof to the Commissioner regarding the deficiencies, nor does sec. 7491(c) place on the Commissioner the burden of production respecting the penalties. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. - 6 - Hoffman v. Commissioner, 298 F.2d 784, 786 (3d Cir. 1962), affg. in part T.C. Memo. 1960-160. Under that method, the excess of a taxpayer’s cash expenditures during a taxable period over his or her known sources of inc

time 9 Pursuant to sec. 7491, the burden of proof can be shifted to respondent if certain conditions are met, including that the examination was commenced before July 22, 1998. Internal 'Revenue Restructuring & Reform Act of 1998, -Pub. L. 105-206, sec. 3001(c), 112 Stat. 727; Higbee v. Commissioner, 116 T.C. 438 (2001). The examination in this case commenced before the' effective date. Accordingly, sec. 7491 is not applicable to this case. - 20 - the services were rendered the parties understoo

onial Ice Co. v. Helvering, 292 U.S. 435 (1934); Welch v. Helvering, 290 U.S. 111 (1933). If petitioner fails to establish LFI’s entitlement to the deductions under 13The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(a), which is applicable to court proceedings arising in connection with examinations commencing after July 22, 1998. Under sec. 7491, Congress requires the burden of proof to be placed on the Commissioner, sub

. OPINION I. Income from the Discharge of Indebtedness A. Burden of Proof Section 7491 applies to this case because the examination in this case began after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 727. We do not find, however, that the resolution of this case depends on which party has the burden of proof. We resolve the issue on the basis of a preponderance of evidence in the record. Assuming arguendo that petitio

if several requirements are met. Sec. 7491(a)(1) and (2). Section 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. Petitioner contends that the examination began after July 22, 1998, and.he points out that he was incarcerated on that date. The notice of deficiency, issued in 1993, states that "from records and information available, i

bedded within the earth (i.e., minerals in place) and (2) secured, by any form of legal relationship, income 2(...continued) examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. -7- derived from the extraction of the minerals to which the taxpayer must look for a return of capital. Sec. 1.611-1(b)(1), (d)(4), Income Tax Regs.; .see also Commissioner v. Southwest Exploration Co., 350 U.S. 308, 313

of the subject years commenced after July 22, 1998. Seeing that section 7491 applies only to court proceedings arising from examinations commencing after July 22, 1998, Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727, we - 12 - conclude that neither section 7491(a) nor (c) applies here. Section 7491(a) places the burden of proof upon the Commissioner in specified circumstances. Section 7491(c) places the burden of production upon the C

espondent. Sec. 7491(a); Rule 142(a)(2). Sec. 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 726. Petitioners do not contend, nor is there evidence, that their examination commenced after July 22, 1998, or that sec. 7491 applies in this case. 6At the hearing, respondent attempted to introduce into evidence a declar

te records, satisfied applicable substantiation requirements, cooperated with respondent, and produced credible evidence with regard to the fact issue, does not apply. See Internal Revenue Service Restructuring and Reform Act of 1998, P.L. 105-206, sec. 3001, 112 Stat. 685, 726. - 7 - by the taxpayer in carrying on the activity; (4) the expectation by the taxpayer that the assets used in the activity may appreciate in value; (5) the success of the taxpayer in carrying on other similar or dissimi

beneficial ownership is the controlling factor.” Cordes v. Commissioner, T.C. Memo. 1994-377 (citing Walker v. Commissioner, 544 F.2d 419 13(...continued) Rule 142(a). The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491(a), which is applicable to court proceedings arising in connection with examinations commencing after July 22, 1998. Under sec. 7491, Congress requires the burden of proof to be placed on the Commissione

beneficial ownership is the controlling factor.” Cordes v. Commissioner, T.C. Memo. 1994-377 (citing Walker v. Commissioner, 544 F.2d 419 13(...continued) Rule 142(a). The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491(a), which is applicable to court proceedings arising in connection with examinations commencing after July 22, 1998. Under sec. 7491, Congress requires the burden of proof to be placed on the Commissione

beneficial ownership is the controlling factor.” Cordes v. Commissioner, T.C. Memo. 1994-377 (citing Walker v. Commissioner, 544 F.2d 419 13(...continued) Rule 142(a). The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491(a), which is applicable to court proceedings arising in connection with examinations commencing after July 22, 1998. Under sec. 7491, Congress requires the burden of proof to be placed on the Commissione

rcumstances to place the burden on the Commissioner, the statute is effective only for court proceedings that arise in connection with examinations commencing after July 22, 1998. Internal Revenue Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. Since the record here is devoid of evidence showing that the underlying examination began after the relevant date, and since the estate - 11 - has at no time contended that the provisions of section 7491 are applicable, w

se Division. Decision will be entered under Rule 155. 1 Section 7491(c), applicable to court proceedings arising in connection with examinations commencing after July 22, 1998, requires the Secretary to carry the burden of production with respect to additions to tax. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. Petitioners do not contend that their examination commenced after July 22, 1998, or that sec. 7491 is applicable to them.

inaccurate and distorted in their favor. The examination in this case commenced after July 22, 1998. Accordingly, section 7491(a), a new provision created by Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726, concerning the allocation of the burden of proof, is effective. Higbee v. Commissioner, 116 T.C. (2001). In the present case, we do not rest our decision on the burden of proof. As demonstrated above, the totality of evidenc

t bear the burden of proof under sec. 7491 because the examination in this case began on Apr. 23, 1997. Sec. 7491 applies to examinations commenced after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 8 - worked only the first 6 months of 1994 because she was pregnant with twins. Petitioner later testified that she worked throughout 1994 but only 6 months in 1995. Petitioner made small deposits throughout 1994 as she

their tax returns nor raised in the notice of deficiency. The examination in the instant case took place after the effective date of sec. 7491, I.R.C., as amended by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726. Held: Because Ps failed to introduce credible evidence, Ps failed to meet the requirements of sec. 7491(a), I.R.C., as amended, so as to place the burden of proof on R for the factual issues relating to the - 2 - deduct

fined as the failure to exercise the due care that a reasonable and ordinarily prudent person would exercise under like circumstances. See Anderson v. Commissioner, 9 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491(c), which places the burden of production on the Secretary with respect to a taxpayer’s liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing

and ordinarily prudent person would exercise under like circumstances. See Anderson v. Commissioner, 62 F.3d 1266, 1271 (10th Cir. 1995), affg. T.C. Memo. 1993-607; 5 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(c), which places the burden of production on the Secretary with respect to a taxpayer’s liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing aft

the following nine nonexclusive factors: (1) The manner 1 Sec. 7491 applies to court proceedings arising in connection with examinations beginning after July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 685, 726. The examination in this case began after July 22, 1998. 2 We discuss the burden of production and burden of proof for the penalties below at par. E. - 9 - in which the taxpayer carried on the activity; (2) the expert

proper tax liability, section 7491 places the burden of proof on respondent. Sec. 7491(a); Rule 142(a)(2). Section 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. RRA 1998 sec. 3001(c)(2), 112 Stat. 726. The undisputed facts indicate that respondent's examination of petitioners' 1995 Federal income tax return commenced before July 23, 1998. Accordingly, section 7491 has no application to this case. Petitioners bear the

. Memo. 1996-206. The focus of inquiry is on the reasonableness of the taxpayer’s actions in light of his experience and the nature of the investment. Henry Schwartz 6 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(c), which places the burden of production on the Secretary with respect to a taxpayer’s liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing aft

the burden of proof on respondent. See sec. 7491(a)(1); Rule 142(a). Section 7491 is effective with respect to examinations commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 727. Respondent concedes that the examinations of the J. and C. Shirleys commenced after July 22, 1998. Section 7491(a)(2) establishes prerequisites (the prerequisites) to establishing that the burden of proof may lie - 18

production in any court proceeding with respect to the liability of any individual for any penalty, addition to tax, or additional amount imposed by this title. [See also Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 727, regarding effective date.] Although the record in this case does not reveal when the examination of petitioners’ 1996 return began, respondent asserts that the burden is not placed on him under section 7491(a) with r

ave the burden of proof on that issue. Generally, the burden of proof is on the taxpayer to show that the Commissioner’s determinations are erroneous. See Rule 142(a). The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, however, added section 7491, which is applicable to court proceedings arising in connection with examinations commenced after July 22, 1998. Under section 7491(a)(1), the burden of proof shifts to 8Although the parties

t. See sec. 7491(a); Rule 142(a)(2). Sec. 7491 is effective with respect to court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 726. Petitioner does not contend, nor is there evidence, that his examination commenced after July 22, 1998, or that sec. 7491 applies in this case. - 6 - this contention. Petitioner has not attempted to controvert the admi

t that he is owed, see United States v. Janis, supra at 440. It is also inconsistent with Congress's intent as expressed in sec. 7491, which was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 685, (continued...) - 12 - B. Minimal Evidentiary Foundation The Court of Appeals has not specified generally what constitutes the required minimal evidentiary foundation. Apparently, however, unless the taxpayer challenges

the burden of proof on respondent. See sec. 7491(a)(1); Rule 142(a). Section 7491 is effective with respect to examinations commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 726. Respondent concedes that the examination of petitioners commenced after July 22, 1998. Section 7491(a)(2) establishes prerequisites (the prerequisites) to establishing that the burden of proof may lie with respondent u

iew of all the evidence. Id. Factors "The burden of proof provisions of sec. 7491 do not apply here because the examination in this case began before July 22, . 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L.. 105-206, sec. 3001, 112 Stat. 726. - 28 - . we ordinarily consider in our analysis include, but are not limited to: (1) The name given to the certificate e·7idencing the indebtedness, (2) the presence or absence of a fixed maturity date, (3) the source of pay

3001(c), 112 Stat. 727. With respect to the case at bar, the parties have stipulated that the examination of Privilege House which led to the constructive dividends pertinent here began on February 6, 1997, the record is bereft of any other evidence that would require applicability of section 7491, and petitioner has at no time so argued. We t

r, under certain circumstances, where a taxpayer introduces credible evidence with respect to factual issues relevant to ascertaining the taxpayer's liability for tax. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 724. Respondent argues that the examination of petitioner’s 1996 income tax liability began on June 22, 1998. Petitioners did not address this issue at trial. Furthermore, petitioners have failed to present credible evidence

g the additions to tax because the examination in this case began after July 22, 1998, but claimed that he does not bear the burden of proof on any issue in this case. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 727 (providing that sec. 7491 is applicable to court proceedings arising in connection with examinations commenced after July 22, 1998); sec. 7491(a), (c). A. The Deficiencies As a general rule, the taxpayer bears the bur

the burden of proof on respondent. See sec. 7491(a)(1); Rule 142(a). Section 7491 is effective with respect to examinations commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 727. Respondent concedes that the examinations of the J. and C. Shirleys commenced after July 22, 1998. Section 7491(a)(2) establishes prerequisites (the prerequisites) to establishing that the burden of proof may lie - 18

ress enacted section 7491, effective July 22, 1998, under which the burden of proof will be placed on respondent if a taxpayer meets certain requirements. See Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726. Under section 7491(a), the burden of proof with regard to any fact issue will be placed on respondent if the taxpayer maintained adequate records, satisfied applicable substantiation requirements, cooperated with respon

any approximation or the unsupported testimony of the 6 We decide the issues in this case without regard to the general rule of sec. 7491(a)(1), which was amended by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(a), 112 Stat. 685, 726, because the record demonstrates that petitioner did not comply with the requirements of sec. 7491(a)(2)(A) and (B). See Higbee v. Commissioner, 116 T.C. (June 6, 2001). Moreover, we do not regard petitioner’s conclus

. Memo. 1996-206. The focus of inquiry is on the reasonableness of the taxpayer’s actions in light of his experience and the nature of the investment. Henry Schwartz 5 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(c), which places the burden of production on the Secretary with respect to a taxpayer’s liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing aft

any determination of penalties or additions to tax. Sec. 7491(c) applies only to court proceedings arising in connection with examinations commenced after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. The notice of deficiency in this case was issued on Feb. 26, 1997, which conclusively establishes that the examination was commenced before July 22, 1998. - 6 - petitioner’s admission that he knows now, and knew in 1991, tha

ceedings arising in connection with examinations commencing after July 22, 1998, under sec. 7491(a) the burden of proof shifts to respondent in specified circumstances. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. The record in this case does not establish the date on which the examination of petitioners’ taxable years at issue began, and neither party contends that sec. 7491(a) applies here. With respect to court proceedings arisin

partnership’s losses. See Estate of Mason v. Commissioner, 64 T.C. 651, 663 (1975), affd. 566 F.2d 2 (6th Cir. 1977); Bixby v. Commissioner, 58 T.C. 757, 791 (1972); 7 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491(c), which shifts the burden of proof to the Secretary with respect to a taxpayer’s liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing aft

ct 7Contrary to petitioners’ assumption, the burden of proof provisions of sec. 7491 do not apply here because the examination in this case began before July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. - 22 - tax liability. See sec. 6001; Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965). In the absence of persuasive corroborating evidence, we are not required to accept the self-serving testimony of interested parties. Se

ee Higbee v. Commissioner, 116 T.C. , (2001). Section 7491 is effective for court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. The notice is dated January 22, 1999. The parties have not informed us whether the examination commenced on or before July 22, 1998. Respondent assumes that petitioner bears the burden of proof, and petitioner does not addre

encing after July 22, 1998, may place the burden on the Commissioner in certain circumstances, a prerequisite is that the taxpayer present credible evidence. Sec. 7491(a); Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 727; Higbee v. Commissioner, 116 T.C. 438 (2001). Thus, while the record in the instant case does not indicate when the examination - 11 - of petitioner’s returns began, petitioner has failed to present any evidence and s

ad house in 1994 and 1995, and that he 3 The burden of proof provisions of sec. 7491 do not apply here because the examination in this case began before July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. - 10 - provided more than half of the cost of maintaining his household in 1994 and 1995. We disagree. Petitioner did not show that Tye lived with him for more than half of the year in 1994 or 1995. Petitioner’s house had

the burden of proof on respondent. See sec. 7491(a)(1); Rule 142(a). Section 7491 is effective with respect to examinations commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 727. Respondent concedes that the examinations of the J. and C. Shirleys commenced after July 22, 1998. Section 7491(a)(2) establishes prerequisites (the prerequisites) to establishing that the burden of proof may lie - 18

ts of section 7491, we emphasize that the statute is applicable only to court proceedings that arise in connection with examinations - 6 - commencing after July 22, 1998. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 727. Since the record here indicates that the examination in this case was ongoing by at least April of 1998, the burden remains on petitioners to establish that respondent’s determinations are erroneous. III. Schedule C R

hat when this case was called for trial, respondent represented that the examination in the instant case commenced after the effective date of section 7491. See Internal Revenue Service Restructuring & Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 727 (providing that sec. - 8 - 7491 is applicable to court proceedings arising in connection with examinations commenced after July 22, 1998). Under section 7491(a), Congress provided that if a taxpayer presents credible

the additions to tax because the examination in this case began after July 22, 1998, but claimed that he does not bear the burden of proof on any issue in this case. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 727 (providing that sec. 7491 is applicable to court proceedings arising in connection with examinations commenced after July 22, 1998); sec. 7491(a), (c). A. The Deficiencies As a general rule, the taxpayer bears the burd

nt. See sec. 7491(a)(1); Interim Rule 142(a)(2). Section 7491 is effective with respect to court proceedings arising from examinations commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 685, 726. Gil Akers is the revenue agent who was assigned to examine both the trust 1995 return and the Carey 1995 return. During the course of those examinations, he sent letters to Michael, with respect to the Carey 1995

ness of the taxpayer’s actions in light of his experience and the nature of the investment. Henry Schwartz Corp. v. Commissioner, 60 T.C. 728, 740 (1973); Greene v. 7 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added sec. 7491(c), which places the burden of production on the Secretary with respect to a taxpayer’s liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing afte

ave the burden of proof on that issue. Generally, the burden of proof is on the taxpayer to show that the Commissioner’s determinations are erroneous. See Rule 142(a). The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, however, added section 7491, which is applicable to court proceedings arising in connection with examinations commenced after July 22, 1998. Under section 7491(a)(1), the burden of proof shifts to 8Although the parties

the burden of proof on respondent. See sec. 7491(a)(1); Rule 142(a). Section 7491 is effective with respect to examinations commenced after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 727. Respondent concedes that the examinations of the J. and C. Shirleys commenced after July 22, 1998. Section 7491(a)(2) establishes prerequisites (the prerequisites) to establishing that the burden of proof may lie - 18

partnership’s losses. See Estate of Mason v. Commissioner, 64 T.C. 651, 663 (1975), affd. 566 F.2d 2 (6th Cir. 1977); Bixby v. Commissioner, 58 T.C. 757, 791 (1972); 7 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491(c), which shifts the burden of proof to the Secretary with respect to a taxpayer’s liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing aft

had agreed to treat the payment as a SThe burden of proof provisions of sec. 7491 do not apply here because the examination in this case began prior to July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726. In support of this contention, respondent relies on Neb. Rev. Stat. sec. 25-205 (1995 Reissue), which reads in pertinent part as follows: Actions on written contracts, on foreign iudgments, or to recover collateral. (1) Exce

e do not look behind the statutory notice to examine the evidence used in making the determination. See Petzoldt v. Commissioner, 92 T.C. 661, 688 (1989); 3 The Internal Revenue Service Restructuring & Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 724-727, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. Sec. 7491, however, is applicable to "court proceedings arising in connection with examinations commencing after the date

o the recently enacted section 7491. However, section 7491 only applies to court proceedings arising in connection with examinations commencing after July 22, 1998. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. There is nothing in the record which establishes that the examination in this case commenced after July 22, 1998. We therefore find that section 7491 does not operate to shift the burden of proof in this case. Accordingly,

year. See secs. 151(c)(1)(A), 152(a). Respondent does not dispute that Mahmoud’s gross income was less than the exemption amount, but contends that Gabriel did not 11 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 724-727, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. Sec. 7491, however, is applicable to court proceedings arising in connection with examinations commencing after July 22, 1

s of section 469, petitioner has not proved that he had losses which were suspended in prior years. Petitioner, however, is entitled to deduct the operating expenses 5 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub.L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491, which is applicable to court proceedings arising in connection with examinations commencing after July 22, 1998. Under sec. 7491, Congress requires the burden of proof to be shifted to the Commissioner,

year. See secs. 151(c)(1)(A), 152(a). Respondent does not dispute that Mahmoud’s gross income was less than the exemption amount, but contends that Gabriel did not 11 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 724-727, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. Sec. 7491, however, is applicable to court proceedings arising in connection with examinations commencing after July 22, 1

. Commissioner, 87 T.C. 74, 77 (1986). 3The burden of proof provisions of sec. 7491 do not apply here because the examination in this case began before July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 724. - 15 - It is not enough for petitioners to claim that the entries recording loans to shareholder must have been made in error. The record makes it abundantly clear that petitioner was ignorant about financial and acco

sumed correct, and petitioners must establish otherwise. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); cf. sec. 7491(c).2 Respondent maintains that 2 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added sec. 7491(c), which shifts the burden of proof to the Secretary with respect to a taxpayer’s liability for penalties and additions to tax in court proceedings arising in connection with examinations commencing afte

year. See secs. 151(c)(1)(A), 152(a). Respondent does not dispute that Mahmoud’s gross income was less than the exemption amount, but contends that Gabriel did not 11 The Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 724-727, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. Sec. 7491, however, is applicable to court proceedings arising in connection with examinations commencing after July 22, 1

bject to certain limitations, where a taxpayer introduces credible evidence with respect to factual issues relevant to ascertaining the taxpayer’s liability for tax. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726-727. Respondent contends that the examination commenced before July 22, 1998, and petitioner has not argued that sec. 7491 is applicable to him. - 18 - A. Legal and Professional Fees Petitioner claimed a deduction of $57,9241

chart is based on his records and his 4 The burden of proof provisions of sec. 7491 do not apply here because the examination in this case began before July 22, 1998. See Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 727. - 9 - personal knowledge of his tax liabilities. We give the chart no weight because it is completely uncorroborated. Petitioners did not offer into evidence the underlying information that petitioner claims to have

3001(a), 88 Stat. 829, 995. Notice may be given "in person, by mailing, by posting, or by printing - 7 - it in a publication of the employer or an employee organization". Sec. 1.7476-2(c)(1), Income Tax Regs. Failure to give proper notice may result in the petition's being dismissed as premature, and the Court will not conduct a review of the

90 U.S. 111 (1933). Normally, the taxpayer bears the initial burden of producing enough evidence to make a prima facie case; i.e., evidence to support a finding contrary to the Commissioner's determination. See Rockwell v. Commissioner, 512 92 Under sec. 3001 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 726, Congress enacted new sec. 7491, which provides, effective with respect to examinations commenced after July 22, 1998, that the burden of p

90 U.S. 111 (1933). Normally, the taxpayer bears the initial burden of producing enough evidence to make a prima facie case; i.e., evidence to support a finding contrary to the Commissioner's determination. See Rockwell v. Commissioner, 512 92 Under sec. 3001 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 726, Congress enacted new sec. 7491, which provides, effective with respect to examinations commenced after July 22, 1998, that the burden of p

90 U.S. 111 (1933). Normally, the taxpayer bears the initial burden of producing enough evidence to make a prima facie case; i.e., evidence to support a finding contrary to the Commissioner's determination. See Rockwell v. Commissioner, 512 92 Under sec. 3001 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 726, Congress enacted new sec. 7491, which provides, effective with respect to examinations commenced after July 22, 1998, that the burden of p

90 U.S. 111 (1933). Normally, the taxpayer bears the initial burden of producing enough evidence to make a prima facie case; i.e., evidence to support a finding contrary to the Commissioner's determination. See Rockwell v. Commissioner, 512 92 Under sec. 3001 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 726, Congress enacted new sec. 7491, which provides, effective with respect to examinations commenced after July 22, 1998, that the burden of p

90 U.S. 111 (1933). Normally, the taxpayer bears the initial burden of producing enough evidence to make a prima facie case; i.e., evidence to support a finding contrary to the Commissioner's determination. See Rockwell v. Commissioner, 512 92 Under sec. 3001 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat. 726, Congress enacted new sec. 7491, which provides, effective with respect to examinations commenced after July 22, 1998, that the burden of p

It is contemplated that only those employees who are entitled to petition the Secretary of Labor under section 3001 of this Act are to be treated as interested parties.

eals, entertainment, and use of listed property defined in section 2 This case was decided without considering the changes in burden of proof arising out of the Internal Revenue Service Restructuring & Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726-727, because those changes apply only "to court proceedings arising in connection with examinations commencing after the date of the enactment of this Act." RRA of 1998 was enacted on July 22, 1998. - 9 - 280F(d)(4),3 ho

es that the Commissioner's determinations are arbitrary and excessive or without rational foundation, then the presumption no longer applies.3 Pittman v. 2 The Internal Revenue Service Restructuring & Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726- 727, added sec. 7491, which shifts the burden of proof to the Secretary in certain circumstances. However, sec. 7491 is applicable to "court proceedings arising in connection with examinations commencing after the date o