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In the amended answer, respondent asserted that petitioners
were liable for an increased deficiency of $31,170 for 1987
because they were not entitled to deduct the $109,140 respondent
had previously allowed for the Dondi Financial stock. In the
amended answer, respondent asserted for the first time that,
because Dondi Financial "became insolvent in a year earlier than
1987, * * * the stock in Dondi Financial Corp. became worthless
no later than August 1, 1985".
4. Increased Deficiency and New Matter Under Rule 142
Respondent contends that the amended answer did not raise
new matter for purposes of Rule 142 and that the notice of
deficiency required petitioners to prove that the Dondi Financial
stock became worthless in 1987. Respondent argues that
respondent discovered that the notice of deficiency mistakenly
failed to disallow all of the deduction, and that respondent's
error was computational. Respondent also contends that the
notice of deficiency was broadly worded and that the amended
answer is consistent with that broad language.
Respondent bears the burden of proof if respondent asserts
an increased deficiency. Rule 142(a). Thus, respondent bears
the burden of proving that petitioner is liable for the
additional deficiency of $31,170.
We also conclude that respondent raised new matter in the
amended answer. Respondent allowed petitioners' deduction in
1987 for part of the Dondi Financial stock loss ($109,140).
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