R. Edwin Brown and Winsome S. Brown - Page 5

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          Subsequently, on April 19, 1994, this Court entered a decision              
          reflecting the settlement of petitioners’ 1988 and 1989 tax                 
          years.  As a consequence, respondent concedes that to the extent            
          petitioner realized a gain on the disposal of the computer                  
          leasing equipment, the gain is reduced by suspended losses from             
          1985-89.  Petitioners did not claim a charitable contribution               
          deduction on their 1990 Federal income tax return relating to the           
          property transferred to the School.                                         
               At the end of the trial, respondent orally moved for leave             
          to conform the pleadings to the evidence.  Petitioners objected.            
          We took the motion under advisement.  We subsequently issued an             
          order indicating that to the extent we allow respondent to amend            
          the pleadings to conform to the proof we would grant petitioners            
          the same privilege.  To this end, we directed the parties to                
          brief the consequences of the sale of the computer equipment and            
          rights to the lease for purposes of claiming a charitable                   
          contribution deduction.                                                     
               As a preliminary matter, we must resolve two issues:                   
          Whether the second statutory notice of deficiency is valid and              
          whether respondent’s motion to conform the pleadings to the                 
          evidence should be granted.                                                 
          Validity of Respondent’s Second Statutory Notice of Deficiency              
               In their petition, petitioners allege that respondent                  
          improperly issued a second statutory notice of deficiency.                  

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