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than 25-percent omission from gross income of an amount properly
includable in gross income. Petitioners also argue that they
have adequately disclosed the omitted amount in the corporation's
Forms 5500 and 5310 filings. Respondent counters by alleging
that the disclosure needs to be in the individual tax return
itself, that the disclosure was inadequate, and that petitioners
are estopped from arguing against the 6-year statute of
limitations.
We need not decide the disclosure issue since respondent has
failed to meet her initial burden of going forward with the
evidence to show that the bar of the 3-year statute of
limitations is not applicable. The parties agree as to the
amount of gross income reported on petitioners' 1986 individual
Federal income tax return. There is no question that petitioners
omitted the merged amount from gross income. The merged amount
is clearly greater than 25 percent of the gross income amount.
Consequently, the only issue is whether respondent has
established, by a preponderance of the evidence, that the merged
amount is "properly includable" in petitioners' gross income for
1986.
Respondent asserts that petitioners are estopped from
arguing that the merged amount is not properly includable in
their gross income for 1986. We have held that petitioners are
not estopped from asserting that the merged amount is not taxable
in 1986. Petitioners have made the required prima facie case;
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