Paul A. Rendina and Janet Mae Rendina - Page 12

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          might have greater merit than the primary position of either of             
          the parties, we had them address this newly raised issue in                 
          supplemental briefs.                                                        
          I.  Lack of Prejudice to Respondent in Addressing Liquidation               
               Respondent maintains that petitioner’s delay in raising the            
          de facto liquidation issue precludes us from addressing it.                 
          Respondent relies on Brown v. Commissioner, T.C. Memo. 1979-443,            
          to argue that our consideration of the new issue raised on brief            
          would severely prejudice her case and violate fundamental                   
          fairness.                                                                   
               We have allowed petitioner to raise the de facto liquidation           
          issue for two reasons.  First, just as respondent is not bound by           
          the theory upon which she relied in determining the deficiency,             
          Blansett v. United States, 283 F.2d 474 (8th Cir. 1960), so                 
          petitioner is not precluded from raising a new theory on post-              
          trial brief.  Ware v. Commissioner, 906 F.2d 62 (2d Cir. 1990),             
          affg. 92 T.C. 1267 (1989) and T.C. Memo. 1989-165 (declining to             
          adopt an ironclad rule that the Tax Court may not consider a                
          legal theory surfacing in posttrial briefs).  Our duty is to                
          consider all the evidence, and in light thereof, decide whether             
          or not petitioner has a deficiency.  We are therefore entitled to           
          adopt a new theory of decision, especially where we give both               
          parties the opportunity to argue its merits.  See Brooks v.                 
          Commissioner, 424 F.2d 116 (5th Cir. 1970), revg. 50 T.C. 927               





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