Knudsen v. Commissioner
United States Tax Court
131 T.C. 185 (2008)
- Written by Steven Pacht, JD
Facts
Dennis and Margaret Knudsen (plaintiffs) asked the United States Tax Court to reconsider its decision rejecting their challenge to the determination by the commissioner (defendant) of the Internal Revenue Service (IRS) that they did not engage in exotic-animal-breeding activity for profit within the meaning of the tax code. The Knudsens argued that although they bore the initial burden of proof, that burden shifted to the commissioner pursuant to 26 U.S.C. § 7491(a) because they showed that they maintained all IRS-required records and complied with the secretary of the Treasury Department’s reasonable requests for witnesses, information, documents, meetings, and interviews. Per the Knudsens, the Tax Court erred in its initial ruling against them when the court stated that it did not need to decide the burden-of-proof issue because its ruling was based on the preponderance of the evidence. Specifically, relying on a decision by the United States Court of Appeals for the Eighth Circuit (whose decisions were not binding in this case, which was subject to review by the United States Court of Appeals for the Tenth Circuit), the Knudsens asserted that the Tax Court must decide the burden-of-proof issue in every case in which the taxpayer invoked § 7491(a).
Rule of Law
Issue
Holding and Reasoning (Marvel, J.)
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