Virginian-Pilot


DATE: Thursday, November 13, 1997           TAG: 9711130017

SECTION: LOCAL                   PAGE: B10  EDITION: FINAL 

TYPE: Opinion 

SOURCE: BY GEORGE K. YIN 

                                            LENGTH:   60 lines




CHANGING THE BURDEN OF PROOF IN TAX CASES

Those who favor changing the burden of proof in tax cases are in for an unhappy surprise. The proposal will likely hurt honest citizens, exactly the opposite of what is intended.

A congressional committee recently approved a proposal to shift the burden of proof to the government when a tax case goes to court. Up until now, taxpayers have always had to prove the correctness of their tax positions. The proposal is just one of a number of ideas intended to reduce the burden of the tax system on honest, hard-working citizens. But will the proposal have that effect?

Suppose a taxpayer claims a deduction for weekly contributions of $100 to a church and the IRS questions the deduction. Suppose the taxpayer indicates that because the contributions were included in the weekly offering, there is no receipt. Should the $100 per week deduction - or a total deduction for the year of $5,200 - be allowed?

It depends, of course. If the taxpayer is being honest and not misstating the amount of the charitable contributions, then the taxpayer should get the deduction. On the other hand, if the taxpayer really only contributed $5 or $10 to the church each week, then the deduction should not be allowed.

Unfortunately, the IRS cannot tell in advance whether a taxpayer is honest or dishonest. Therefore, the burden of having to disprove the taxpayer's claim in order to prevail in court, it might feel compelled to discover more facts to find out. It might, for example, try to identify the taxpayer's church and interview church leaders to see if they had any knowledge of the contributions. It might attempt to ask fellow worshipers whether any of them saw the $100 cash contribution being made each week. Or whether any of them could even verify how frequently the taxpayer attended church. And it might try to examine the taxpayer's overall financial situation - where did the taxpayer get the money from, what else did the taxpayer spend money on, is that level of contribution realistic given the taxpayer's situation and so forth.

In other words, to meet its burden of proof, the IRS might have to invade the privacy of citizens, honest and dishonest alike, to a greater extent than ever.

Would the IRS really do all of that? Probably not in most cases because its resources are limited. But the more deductions permitted without any investigation by the IRS or substantiation by taxpayers, the more tempting it will be for honest citizens to exaggerate the amount of their contributions. And the less tax paid by those who cheat or exaggerate, the more tax that must be paid by those who do not.

In short, the proposal is likely to hurt honest taxpayers in at least two different ways. First, a few poor, honest souls would be subject to audits much more intrusive than now. And all honest taxpayers would have to pay more in taxes to make up for amounts not paid by the increasing number of tax cheats who would escape detection under the new proposal.

As the old saying goes, beware of what you wish for because you might get it. MEMO: George K. Yin is Harrison Foundation research professor of law at

the University of Virginia. KEYWORDS: ANOTHER VIEW



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