Shift Burden of Proof in Fraud Cases

IRC §7454(a)

In any Tax Court proceeding where the IRS alleges fraud with intent to evade tax, the burden of proof is placed on the Secretary (IRS) rather than the taxpayer.

Eligibility

Applies to taxpayers facing IRS allegations of civil tax fraud; the taxpayer can prevail by showing the IRS failed to meet its higher burden of proof.

Frequently Asked Questions

Who is eligible for the Shift Burden of Proof in Fraud Cases?

Applies to taxpayers facing IRS allegations of civil tax fraud; the taxpayer can prevail by showing the IRS failed to meet its higher burden of proof.

How does the Shift Burden of Proof in Fraud Cases work?

In any Tax Court proceeding where the IRS alleges fraud with intent to evade tax, the burden of proof is placed on the Secretary (IRS) rather than the taxpayer.

What law authorizes the Shift Burden of Proof in Fraud Cases?

The Shift Burden of Proof in Fraud Cases is authorized under IRC §7454(a) of the Internal Revenue Code (Title 26, United States Code).

Statutory Text — IRC §7454

Source: Internal Revenue Code, Title 26, United States Code

§ 7454. Burden of proof in fraud, foundation manager, and transferee cases(a) FraudIn any proceeding involving the issue whether the petitioner has been guilty of fraud with intent to evade tax, the burden of proof in respect of such issue shall be upon the Secretary. (b) Foundation managersIn any proceeding involving the issue whether a foundation manager (as defined in section 4946(b)) has “knowingly” participated in an act of self-dealing (within the meaning of section 4941), participated in an investment which jeopardizes the carrying out of exempt purposes (within the meaning of section 4944), or agreed to the making of a taxable expenditure (within the meaning of section 4945), or whether the trustee of a trust described in section 501(c)(21) has “knowingly” participated in an act of self-dealing (within the meaning of section 4951) or agreed to the making of a taxable expenditure (within the meaning of section 4952), or whether an organization manager (as defined in section 4955(f)(2)) has “knowingly” agreed to the making of a political expenditure (within the meaning of section 4955), or whether an organization manager (as defined in section 4912(d)(2)) has “knowingly” agreed to the making of disqualifying lobbying expenditures within the meaning of section 4912(b), or whether an organization manager (as defined in section 4958(f)(2)) has “knowingly” participated in an excess benefit transaction (as defined in section 4958(c)), the burden of proof in respect of such issue shall be upon the Secretary. (c) Cross referenceFor provisions relating to burden of proof as to transferee liability, see section 6902(a). (Aug. 16, 1954, ch. 736, 68A Stat. 884; Pub. L. 91–172, title I, § 101(j)(57), Dec. 30, 1969, 83 Stat. 532; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–227, § 4(d)(7), Feb. 10, 1978, 92 Stat. 23; Pub. L. 96–222, title I, § 108(b)(3)(B), Apr. 1, 1980, 94 Stat. 226; Pub. L. 100–203, title X, §§ 10712(c)(6), 10714(b), Dec. 22, 1987, 101 Stat. 1330–467, 1330–471; Pub. L. 104–168, title XIII, § 1311(c)(5), July 30, 1996, 110 Stat. 1478; Pub. L. 104–188, title I, § 1704(t)(43), Aug. 20, 1996, 110 Stat. 1889; Pub. L. 115–141, div. U, title IV, § 401(a)(329), Mar. 23, 2018, 132 Stat. 1200.)

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Legal Sources

US Code (Official) — 26 USC §7454 → Cornell Law Institute — 26 USC §7454 → Search IRS.gov for IRC §7454(a) → Treasury Regulations (26 CFR) →

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