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Who Bears The Burden Of Proof In Tax Litigation

3057 words - 13 pages


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 only shows the Commissioner's determination of gross income is random and unwarranted. The burden of going forward with the evidence then shifts to the Commissioner to prove the correct amount of gross income. However, the Tax Court has held that the burden is each time with the taxpayer to prove the amount of a claimed deduction, although the Commissioner's determination was random and unwarranted.
Burden/Standard of Proof Rules
Courts usually follow the long-standing common law tradition despite of how litigation begins. In general evidence is introduced by the party bringing the lawsuit to prove his or her case. However, to this rule there are two exceptions: 1) the courts can relieve the plaintiff of the burden of proving the case when it is blatantly inequitable to follow the general rule, or 2) the courts may abide by a different rule set by statutory provisions. Common law tradition and the two exceptions are commonly referred to as the burden of proof rules.
Courts often divide the burden of proof into a burden of going forward and a burden of persuasion. A burden of going forward is introducing evidence and the burden of persuasion is convincing the court the taxpayer is correct. A prima facie case is made once...

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