Court Opinion

ID: 4484232
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:16:36.282133+00
Date Added: 2024-06-11T15:03:30.104394
License: Public Domain

Fay, J., concurring: I concur with the result reached by the majority in this case because I believe that Judge Sterrett, as the trier of fact, is in the best position to evaluate as a whole the testimony and other evidence upon which his report is based. I write separately to express my concern that this case and Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979), revg. 67 T.C. 672 (1977), are leading us toward bifurcated trials in most if not all cases in this Court involving unreported illegal income. In Weimerskirch v. Commissioner, supra, Jackson v. Commissioner, 73 T.C. 394 (1979), and this case,1 petitioners charged with unreported illegal income have asked us to “shift the burden of proof to respondent,” Weimerskirch v. Commissioner, 67 T.C. at 674. I do not believe that there is today a great deal of disagreement about the substantive rule applied in these cases. See Jackson v. Commissioner, supra; Harbin v. Commissioner, 40 T.C. 373 (1963). In my view, what remains unsettled is the accompanying procedural issue, namely: At what stage may a petitioner properly ask the Court to shift the burden of proof? A contributing problem stems from the assumption that the burden of producing evidence can somehow be disassociated from the burden of proof.2 See Suarez v. Commissioner, 58 T.C. 792, 815, 816 (1972) (Judge Drennen concurring; Judge Tannen-wald concurring). The majority opinion in the instant case states, “a showing by petitioner that the statutory notice is arbitrarily excessive or without foundation has the effect of shifting the burden of going forward with the evidence to respondent,” supra at 264, while suggesting that the underlying burden of proof has not been shifted. Judge Drennen, in his dissent, infra, would upon an appropriate showing decide “which party must go first with its evidence.”3 The Court of Appeals for the Ninth Circuit has stated “the Commissioner must offer some foundational support for the deficiency determination before the presumption of correctness attaches to it,” Weimerskirch v. Commissioner, 596 F.2d at 361 (emphasis added), implying that some initial showing by the respondent is required in every income reconstruction case. See also Gerardo v. Commissioner, 552 F.2d 549, 554 (3d Cir. 1977), affg. in part and revg. in part a Memorandum Opinion of this Court. If the inference to be drawn from the foregoing is that an unreported income case involves a two-stage trial, in which the Court first rules on petitioner’s motion to shift the burden of proof and then hears evidence on the underlying issue, I strongly disagree. Helvering v. Taylor, 293 U.S. 507 (1935), involved the amount of income to be reported from a sale of securities. The Supreme Court first reaffirmed the general proposition: “Unquestionably the burden of proof is on the taxpayer to show the Commissioner’s determination is invalid.”4 (293 U.S. at 515.) The case went on to hold that if the taxpayer has shown the notice of deficiency to be arbitrary and excessive, then the respondent must show the correct amount of the deficiency, if any. In other words, if the petitioner has carried his burden of proof (or made a prima facie case), then the burden of proving a deficiency in tax due shifts to the respondent. Mere allegations are not enough because it is petitioner’s proof on the underlying issue that determines whether any burden has shifted to the respondent. It is therefore my view that “who goes first” is an illusory issue and that in the ordinary case, a pretrial “motion to shift the burden of proof” would be premature. See Harbin v. Commissioner, supra. Because the petitioner starts with the burden of proof, he goes first. To superimpose on the rule of Helvering v. Taylor, supra, the concept that the petitioner retains the burden of proof, even though the burden of producing evidence has shifted to the respondent, leads us into theoretical areas fraught with confusion. The fact is that a petitioner in this Court, like plaintiffs elsewhere, bears the risk of nonpersuasion and must show he is entitled to the relief he claims. If he does not, the respondent’s determination stands. I recognize that a petitioner trying to disprove unreported income has a difficult task. See Weir v. Commissioner, 283 F.2d 675, 679 (6th Cir. 1960). In such a case, a petitioner’s showing that the respondent’s notice was arbitrary and excessive is merely one way of meeting his burden of proof. See United States v. Janis, 428 U.S. 433, 442 (1976). Under some circumstances, such a showing may be a petitioner’s only means of proof, given that a taxpayer cannot be expected to produce records about something that never happened. We approved of such a method of proof in Jackson v. Commissioner, supra. But that is a far different matter from allowing a taxpayer to appear, move to shift the burden of proof, and then rest, forcing the respondent to show how the notice of deficiency was constructed. I agree with Judge Tannenwald that taxpayers charged with illegal income are not entitled to special treatment simply by raising the issues decided in Weimerskirch v. Commissioner, supra, and in this case.   See Grove v. Commissioner, T.C. Memo. 1980-83 (Mar. 20, 1980); Barber v. Commissioner, T.C. Memo. 1980-39 (Feb. 12, 1980). See also Suarez v. Commissioner, 58 T.C. 792, 813-815 (1972).    See J. McNaughton, “Burden of Production of Evidence: A Function of a Burden of Persuasion,” 68 Harv. L. Rev. 1382 (1955). See generally J. Thayer, “The Burden of Proof,” 4 Harv. L. Rev. 45 (1890).    Compare Suarez v. Commissioner, 58 T.C. at 816 (Judge Drennen concurring): “Petitioner, being the moving party, should provide sufficient evidence to make a prima facie case; otherwise his petition will fail from inertia. Unless the respondent has the burden of proof, I see little reason for him to move forward.”    We are not here concerned with any of the well-defined exceptions to this general rule. E.g., sec. 534 (accumulated earnings tax); sec. 6902(a) (transferee liability); sec. 7454(a) (fraud); Rule 142(a), Tax Court Rules of Practice and Procedure (new matter).