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8.1 Tax Refund Actions—Elements and Burden of Proof—Claimed Refund

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8.1 TAX REFUND ACTIONSELEMENTS AND BURDEN OF PROOFCLAIMED REFUND

[On the plaintiff’s __________ claim,] the plaintiff has the burden of proving each of the following elements by a preponderance of the evidence:

1. the plaintiff is entitled to a refund;

2. the amount of the refund; and

3. that the government has declined to pay the refund.

If you find that the plaintiff has proved each of the elements on which the plaintiff has the burden of proof, your verdict should be for the plaintiff. If, on the other hand, the plaintiff has failed to prove any of these elements, your verdict should be for the defendant. 

Comment

Because IRS tax assessments are presumed to be correct, the taxpayer bears the burden of proving the amount he or she is entitled to recover. See United States v. Janis, 428 U.S. 433, 440 (1976). The burden is by a preponderance of the evidence. See North Dakota State University v. United States, 255 F.3d 599, 603 (8th Cir.2001). After the taxpayer produces "credible evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer. . ." the burden of proof shifts to the government on that issue, so long as the requirements of § 7491(a)(2) are met. See 26 U.S.C. § 7491 (Those requirements include substantiation of the item, maintenance of books and records, cooperation in providing information and, in the case of a partnership, corporation or trust, a net worth of no more than $7 million.) According to the legislative history, "credible evidence" is "the quality of evidence which, after critical analysis, the court would find sufficient upon which to base a decision if no contrary evidence were submitted (without regard to the judicial presumption of IRS correctness)." See, Saltzman, IRS Practice and Procedure, § 7 B.11[2][a], Revised 2d Ed. (2004). If the evidence obtained from both sides is equally balanced, the Commissioner of Internal Revenue has not sustained his burden of proof as to that issue. See, Bittker, Federal Income Taxation of Individuals § 51.02, 2d Ed., Supp. No. 1 (2005).