Involved in federal civil tax litigation? Wondering who has the burden of proof in litigation?
Burden of proof is the responsibility to prove the entries, deductions, or statements made on a taxpayer’s return. In order to deduct certain expenses they are substantiated by proof. When the burden of proof is on the taxpayer, the taxpayer keeps adequate records to prove their expenses or has sufficient evidence to support statements. Generally, documented evidence such as receipts, canceled checks, or bills is used to support expenses. However, the taxpayer provides additional evidence for travel, entertainment, gifts, and auto expenses.
Burden of Proof General Rule
The burden of proof is on a taxpayer to prove otherwise that a deficiency determination made by the Commissioner is incorrect, which is presumed to be correct. Dissimilarity exists between the consequence of the presumption of correctness connected to determinations of the Commissioner and the burden of proof. The burden of persuasion requires the responsible party to establish their claim. The presumption of correctness compels a taxpayer to go forward with evidence to sustain a finding opposing to the Commissioner's determination. The burden of going forward with the evidence changes to the Commissioner when the presumption of correctness is overwhelm with proficient evidence adequate to ascertain that the Commissioner's determination is erroneous. The party with the burden of proof still bears the ultimate burden of persuasion regardless of whether the burden of going forward with evidence is met.
The character of the burden differs for a taxpayer depending on whether the disputed deficiency is based on under-reported income or overstated deductions. A taxpayer o...
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...ed where the burden of proof shifts to the Commissioner. Two new exceptions relieving the taxpayer of all or part of the burden of proof were recently provided by Congress and the tax court. The first exception is found in the IRS Restructuring and Reform Act of 1998. The second one under I.R.C. §7491, shifts the burden of proof to the Commissioner if the taxpayer meets certain evidentiary and substantive requirements. When faced with a potential penalty, §7491 places the burden directly on the Commissioner. If Commissioner establishes the taxpayer’s alleged income based on statistical information, Congress relieved the taxpayer of the burden of proof.
In tax court ruling, Shea v. Commissioner, the court held that the Commissioner carries the burden of proof as to each item that is not stated or described in the notice of deficiency and requires different evidence.