Chapter 5

Burden of Proof in Valuation Controversies

Summary

This chapter discusses the burden of proof as it relates to valuation. Burden of proof is a concept used to assess facts in trials and is composed of two burdens. First, the burden of proof determines which party must initially produce evidence so as to avoid having her suit dismissed. This is called the burden of production. Second, it determines which party must ultimately persuade the court as to the correctness of its position. This is termed the burden of persuasion. Note that the two burdens are totally distinct. Thus, the burden of production is not inevitably assigned to the party that bears the burden of persuasion.

The burden of proof can determine the outcome in cases where there is little evidence on the issue in controversy. Normally, the burden rests upon the taxpayer, and the position of the Internal Revenue Service Commissioner is presumed to be correct. However, the burden may be shifted at the court's discretion or by statute.

The burden of proof is one of the many factors to assess in planning a transaction involving a valuation event. Although it is true that only a small percentage of all of the valuation reports produced in the planning process ultimately are involved in litigation, planners need to know what the burden of proof is and which party must carry it in order to prepare proper documentation in the event that the valuation becomes controversial.

Audits and Appeals

Although burden of proof ...

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