- 23 -- 23 -
United States, supra at 1245; Marcello v. Commissioner, supra at
511; Tokarski v. Commissioner, supra at 77.
Turning now to the parties' dispute as to whether respondent
is raising certain matters that are not properly before us, it is
significant that petitioners do not dispute, and we find on the
instant record, that they were not surprised or prejudiced by
respondent's arguments at trial and on brief that petitioners
have unreported income for 1989 and 1990 resulting from the
deposits of misappropriated funds and for 1990 resulting from the
discharge of the outstanding balances of the Kabeiseman loans.
See Leahy v. Commissioner, 87 T.C. 56, 65 (1986); Estate of
Horvath v. Commissioner, 59 T.C. 551, 555 (1973). We further
find on that record that those matters were before the Court
within the meaning of Rule 41(b)(1). The record before us
contains stipulations, joint exhibits, and testimony relevant to
those matters, and there is no indication that petitioners had
any additional evidence that they did not present at trial with
respect thereto. See Leahy v. Commissioner, supra at 64; Fox
Chevrolet, Inc. v. Commissioner, 76 T.C. 708, 735-736 (1981).
Moreover, with respect to respondent's argument that petitioners
have unreported income for 1989 and 1990 resulting from the
deposits of misappropriated funds, petitioners' counsel addressed
that argument in his opening statement at trial and elicited
relevant testimony with respect to it from both petitioner and
Mr. Kabeiseman. Furthermore, with respect to respondent's
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