repairs to prove the casualty loss. See sec. 1.165-7(a)(2)(ii), Income Tax Regs. In general, estimates of the cost of repairs are not evidence of the actual costs of repairs unless the repairs are actually made. See Lamphere v. Commissioner, 70 T.C. 391, 396 (1978); Farber v. Commissioner, 57 T.C. 714, 719 (1972).

Petitioners claim a casualty loss deduction in the amount of $1,328 on account of alleged damage to their home and personal property which was not deducted on their tax return. Mr. Higbee testified that the $1,328 represents the damage to petitioners' property which was not reimbursed by their insurance company but awarded by a small claims court.3 In support, petitioners provided a form document entitled "Small Claims Complaint/Summons/Answer" which appears to have been issued by the Glendale Justice Court in Glendale, Arizona, but which does not bear any type of notation or certification by a governmental official.

In order for section 7491(a) to place the burden of proof on respondent, the taxpayer must first provide credible evidence. The statute itself does not state what constitutes credible evidence. The conference committee's report states as follows:

Credible evidence is the quality of evidence which, after critical analysis, the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted (without regard to the judicial presumption of IRS correctness). A taxpayer has not produced credible evidence for these purposes if the taxpayer merely makes implausible factual assertions, frivolous claims, or tax protestor-type arguments. The introduction of evidence will not meet this standard if the court is not convinced that it is worthy of belief. If after evidence from both sides, the court believes that the evidence is equally balanced, the court shall find that the Secretary has not sustained his burden of proof. [H. Conf. Rept. 105-599, at 240-241 (1998), 1998–3 C.B. 747, 994-995.]

Further, the conference report explains the purpose of the limitations set forth in section 7491(a)(2):

Nothing in the provision shall be construed to override any requirement under the Code or regulations to substantiate any item. Accordingly, taxpayers must meet applicable substantiation requirements, whether generally imposed 10 or imposed with respect to specific items, such as charitable contributions or meals, entertainment, travel, and certain other expenses. Substantiation requirements include any requirement of the

3 Petitioners assert that the judgment remains unpaid.

Code or regulations that the taxpayer establish an item to the satisfaction of the Secretary. Taxpayers who fail to substantiate any item in accordance with the legal requirement of substantiation will not have satisfied the legal conditions that are prerequisite to claiming the item on the taxpayer's tax return and will accordingly be unable to avail themselves of this provision regarding the burden of proof. Thus, if a taxpayer required to substantiate an item fails to do so in the manner required (or destroys the substantiation), this burden of proof provision is inapplicable.

10 See e.g., Sec. 6001 and Treas. Reg. sec. 1.6001-1 requiring every person liable for any tax imposed by this Title to keep such records as the Secretary may from time to time prescribe, ***.

[Id. at 241, 1998–3 C.B. at 995; certain fn. refs. omitted.]

Petitioners' evidence does not meet the requirements of section 7491(a). Besides the fact that the form document entitled "Small Claims Complaint/Summons/Answer" does not actually indicate whether litigation in small claims court was commenced or completed, the document itself does not qualify as a competent appraisal or reliable estimate of the cost of any repairs. Because petitioners have failed to provide credible evidence of a casualty loss, the burden of proof as to this issue is not placed on respondent. Further, for similar reasons regarding our discussion of petitioners' evidence for purposes of section 7491, we conclude that petitioners have not met their burden of proof. See Rule 142(a). Consequently, we reject petitioners' claimed casualty loss deduction.

B. Charitable Contributions

Section 170(a)(1) provides that a taxpayer may deduct "any charitable contribution *** payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary." Pursuant to the Treasury regulations, contributions of money are required to be substantiated by canceled checks, receipts from the donee organizations showing the date and amount of the contributions, or other reliable written records showing the name of the donee, date, and amount of the contributions. See sec. 1.170A13(a)(1), Income Tax Regs. Similarly, contributions of property other than money must be substantiated, at a minimum, by a receipt from the donee showing the name and address

of the donee, the date and location of the contribution, and a description of the property in detail reasonably sufficient under the circumstances. See sec. 1.170A-13(b)(1), Income Tax Regs. Where it is unrealistic to obtain a receipt, taxpayers must maintain reliable written records of their contributions. See id.

To substantiate additional charitable contributions of $6,937.20 for 1996 not previously claimed on their return for that year, petitioners offered several documents to the Court. Some of the documents do not have any indication of being provided by a donee organization but instead appear to have been generated by petitioners. Other documents consist of preprinted forms issued by alleged charitable organizations which petitioners filled in with the type and number of items donated and the estimated value of the donation. In addition, petitioners submitted checks and receipts which appear to be for the purchase of goods and services. Lastly, at trial, petitioners attempted to buttress their claims by describing the types of goods allegedly donated.

While the preprinted forms appear authentic, we nevertheless conclude that petitioners' self-generated receipts and other documents are not credible evidence of the order necessary to substantiate the deductions claimed in the instant case. See Tokh v. Commissioner, T.C. Memo. 2001-45. Further, we do not find petitioners' testimony credible. We hold that petitioners have failed to introduce credible evidence to substantiate the actual items contributed and their fair market values. See sec. 7491(a)(1) and (2)(A). Consequently, the burden of proof is not placed on respondent. Because petitioners have failed to present us with any credible evidence, they have not met their burden of proof pursuant to Rule 142(a) to support their claimed deductions. We therefore hold that petitioners are not entitled to a deduction for charitable contributions in excess of the $1,500 that respondent has already allowed.

4 For instance, on one of the preprinted forms, petitioners listed a charitable contribution of $700 for "cribs" and $200 for "baby clothes". Because petitioners have failed to establish how they arrived at those fair market values, we are unable to allow such deductions. Further, petitioners have not produced any other independent and credible evidence indicating that those donations were actually made.

C. Unreimbursed Employee Expenses and Schedule C and E Expenses

Petitioners argue that they are entitled to a deduction of $6,468.09 for unreimbursed employee expenses instead of the $3,075 deduction returned on their Schedule A for 1996. Aside from Mrs. Higbee's self-serving testimony at trial that these additional expenses related to her employment at a beauty salon, petitioners have failed to provide us with sufficient and credible evidence for us to rule in their favor.

Petitioners also claim additional Schedule C deductions of $8,087.26 for 1996 and $8,590.48 for 1997 on account of amounts allegedly owed and paid with regard to their failed beauty salon business. Petitioners contend that they paid these amounts while in a chapter 13 bankruptcy proceeding.5 In support, petitioners submitted to the Court a document entitled "Debtor Receipts and Disbursements Summary" which provides general information about the deposits made by petitioners with the trustee of the bankruptcy estate and the disbursements to creditors by the trustee. As to the bankruptcy-related expenses claimed, petitioners have failed to provide us with sufficient credible evidence that petitioners had outstanding business debts which were paid while in bankruptcy. Further, petitioners have failed to explain the origin of these expenses in sufficient detail for us to find that these expenses would be allowable for the tax years in issue. Petitioners have failed to meet the substantiation and recordkeeping requirements of section 7491(a). The burden of proof therefore is not placed on respondent. Finally, we conclude that petitioners have not met their burden of proof to support the claimed deductions, and therefore we sustain respondent's determination as to this issue. See Rule 142(a).

Petitioners also claim additional Schedule E deductions with regard to their rental activities for repairs ($5,976.31 for 1996 and $2,080 for 1997), legal expenses ($5,217 for 1996), automobile expenses ($475.64 for 1996), and insurance ($139 for 1996) not previously deducted on their tax returns. Again, we reiterate that petitioners have failed to provide this Court with credible evidence for us to allow petitioners'

5 The claimed deduction of $8,087.26 for 1996 encompasses the $1,920 still in dispute with regard to respondent's deficiency determination.

claims with respect to the disallowed deductions. We therefore reject all of petitioners' contentions as to these issues. II. Addition to Tax and Accuracy-Related Penalty

Under RRA 1998, Congress also enacted a provision, section 7491(c), requiring the Commissioner to carry the "burden of production" in any court proceeding with respect to the liability of any individual for any penalty, addition to tax, or additional amount (penalties). Although the statute does not provide a definition of the phrase "burden of production", we conclude that Congress' intent as to the meaning of the burden of production is evident from the legislative history. The legislative history of section 7491(c) sets forth:

in any court proceeding, the Secretary must initially come forward with evidence that it is appropriate to apply a particular penalty to the taxpayer before the court can impose the penalty. This provision is not intended to require the Secretary to introduce evidence of elements such as reasonable cause or substantial authority. Rather, the Secretary must come forward initially with evidence regarding the appropriateness of applying a particular penalty to the taxpayer; if the taxpayer believes that, because of reasonable cause, substantial authority, or a similar provision, it is inappropriate to impose the penalty, it is the taxpayer's responsibility (and not the Secretary's obligation) to raise those issues. [H. Conf. Rept. 105-599, supra at 241, 1998-3 C.B. at 995.]

Therefore, with regard to section 7491(c), we conclude that for the Commissioner to meet his burden of production, the Commissioner must come forward with sufficient evidence indicating that it is appropriate to impose the relevant penalty.

The legislative history to section 7491(c), however, also discloses that the Commissioner need not introduce evidence regarding reasonable cause, substantial authority, or similar provisions. In addition, the legislative history indicates that it is the taxpayer's responsibility to raise those issues. We therefore conclude that the taxpayer bears the burden of proof with regard to those issues.

Finally, we note that Congress placed only the burden of production on the Commissioner pursuant to section 7491(c). Congress' use of the phrase "burden of production" and not the more general phrase "burden of proof" as used in section 7491(a) indicates to us that Congress did not desire that the burden of proof be placed on the Commissioner with regard