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the amount consists of State and Federal taxes payable.
Respondent revised this figure to $21,985 in the Bardahl
calculations she prepared for trial. The revision has the
effect of increasing available net liquid assets, the excess of
new liquid assets over working capital needs, and hence the
accumulated earnings tax liability. Therefore the revision
constitutes “new matter” for which respondent bears the burden
of proof. Rule 142(a); Achiro v. Commissioner, 77 T.C. 881,
890 (1981). Respondent provided no explanation at trial.
Consequently we must use the figure originally accepted in the
notice of deficiency.
7. The starting point for computing accumulated taxable
income is petitioner’s correct taxable income for the year.
Sec. 535(a). The figure used by respondent improperly failed
to reflect a deduction for the insurance premium.
8. In her computation of accumulated taxable income
respondent deducted from taxable income the amount of Federal
income tax due for the year as determined in the notice of
deficiency. This was an error. Section 535 provides for the
deduction of Federal income tax accrued during the taxable
year. Sec. 535(b)(1). For this purpose a tax liability is not
treated as accrued during the taxable year if the taxpayer
contested it at the time it was proposed. Dixie Pine Prods.
Co. v. Commissioner, 320 U.S. 516 (1944); Goodall’s Estate v.
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