Regarding the burden of proof in a civil tax proceeding, which of the following statements is correct regarding the shift of the burden of proof to the IRS under IRC §7491?

Answer options:

The burden of proof shifts to the IRS in all civil tax proceedings once the taxpayer files a petition with the Tax Court.

The burden of proof shifts to the IRS only if the taxpayer provides credible evidence and has a net worth of less than $10 million.

The burden of proof shifts to the IRS for any factual issue if the taxpayer introduces credible evidence, complies with substantiation requirements, and cooperates with reasonable requests for information.

The burden of proof shifts to the IRS for any factual issue if the taxpayer introduces credible evidence, maintains required records, and cooperates with reasonable requests for information.

How to approach this question

Distinguish between the general rule (taxpayer has burden) and the exception (shift to IRS). The exception requires specific taxpayer actions: credible evidence, record maintenance, and cooperation.

Full Answer

D.The burden of proof shifts to the IRS for any factual issue if the taxpayer introduces credible evidence, maintains required records, and cooperates with reasonable requests for information.✓ Correct

Under IRC §7491, the burden of proof shifts to the IRS on a factual issue if the taxpayer: (1) introduces credible evidence with respect to the issue, (2) has complied with the requirements to substantiate any item, (3) has maintained all records required by the Code, and (4) has cooperated with reasonable requests by the IRS for witnesses, information, documents, meetings, and interviews.

Common mistakes

Assuming the burden shifts automatically in Tax Court.

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