- 19 -
With respect to petitioner's argument that she qualifies
under section 1.469-5T(a)(4), Temporary Income Tax Regs., supra,
respondent contends that petitioner failed to raise this argument
in a timely fashion. Respondent argues that because no discovery
was conducted with respect to petitioner's participation in her
accounting partnership, undue prejudice would result were we to
consider this issue. Respondent also maintains that, even if the
Court considers petitioner's argument, petitioner has failed to
adequately substantiate the requisite hours in the condominium
hotel activity and in the accounting partnership activity.
It is well settled that we will not consider issues raised
by parties when undue surprise and prejudice would result.
Seligman v. Commissioner, 84 T.C. 191, 198 (1985), affd. 796 F.2d
116 (5th Cir. 1986). While petitioner's pre-trial memorandum
broadly argued that her activities constituted material
participation under section 469, petitioner introduced this
particular argument during closing arguments. We note, however,
that the notice of deficiency characterizes petitioner's
condominium rental activities as "passive activities" under
section 469. Moreover, respondent's pre-trial memorandum argues
that petitioner failed to meet each of the seven tests contained
in the regulations, including section 1.469-5T(a)(4), Temporary
Income Tax Regs., supra. Petitioner reported her accounting
partnership activities on her returns, and respondent was well
aware that the only issue in this trial was whether petitioner's
activity constituted material participation in the ownership of
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011