Burden of Proof in the Tax Court after the IRS Restructuring and Reform Act of 1998 and Shea v. Commissioner

Joni Larson, Burden of Proof in the Tax Court after the IRS Restructuring and Reform Act of 1998 and Shea v. Commissioner, 36 Gonz. L. Rev. 49 (2001).

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Before the Commissioner of the Internal Revenue Service can make an assessment[1] of tax  against a taxpayer for deficiency,[2] the Commissioner must mail to the taxpayer a final administrative determination of the taxpayer’s tax liability for the tax year in the form of a statutory notice of deficiency (notice).[3] If the taxpayer wants to contest the Commissioner’s determination without having to first pay the proposed deficiency, a petition must be filed with the United States Tax Court within 90 days from the date the notice was mailed.[4] If the taxpayer lives outside the United States, the petition must be filed within 150 days.[5] If the notice is valid and the petition is timely filed, the tax court has jurisdiction to redetermine the correct amount of deficiency, if any.[6] In addition, upon the issuance of a valid notice, the Commissioner cannot make an assessment until the tax court decision becomes final. If the taxpayer has not filed a petition with the tax court, the Commissioner is barred from making an assessment until the 90 days (or 150 days if applicable) after the date the notice was mailed has elapsed.[7]

This Article begins by considering what constitutes a valid notice of deficiency. It then considers the burden of proof in the tax court, situations when the burden may shift, and situations when it is specifically placed on the Commissioner by statute or the Tax Court Rules of Practice and Procedure. The Appendix summarizes, in the form of a flow chart, the issues that should be considered with respect to the validity of the notice and the burden of proof. Part IV of the Article addresses the impact of the IRS Restructuring and Reform Act of 1998 has had on the burden of proof in the tax court. This Act has shifted the burden of proof to the Commissioner, provided the taxpayer can meet certain requirements. Lastly, Part V analyzes the effect the tax court’s recent ruling in Shea v. Commissioner will have on burden of proof as it relates to the notion of “new matter.”… Read More

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