- 12 -
Commissioner, supra at 507; Achiro v. Commissioner, 77 T.C. 881,
890-891 (1981).
At trial, petitioners asserted that respondent's argument
regarding prejudgment interest presented a new matter under Rule
142(a). Respondent's prejudgment interest argument did not
require an increase in the deficiency arising from the
condemnation proceeds, which were characterized as ordinary
income in the notice. However, respondent's prejudgment interest
argument did require the presentation of different evidence.
Accordingly, at trial, we shifted the burden of proof to
respondent on this issue. Rule 142(a); Wayne Bolt & Nut Co. v.
Commissioner, supra at 507; Achiro v. Commissioner, supra at 890-
891. Respondent does not dispute this determination on brief.
In regard to the remaining issues, however, petitioners bear the
burden of proof. Rule 142(a); INDOPCO, Inc. v. Commissioner,
supra at 84.
Issue 1. Involuntary Conversion
Respondent determined that the $62,937.35 paid by the State
to petitioners in tax year 1989 should be included in their
income. Respondent further asserted that a portion of this
$62,937.35 should be characterized as interest. Petitioners
concede that $1,333.35 of the $62,937.35 is taxable interest
income, but no more. Furthermore, they argue that, under the
authority of section 1033, the remaining amount ($61,604) should
not be included in their income in tax year 1989.
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