French E. Hickman and Janice C. Hickman - Page 19

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          tions at issue.  Petitioners did not claim at trial that they               
          were surprised by respondent's position under section 72(p)(3).             
          To the contrary, petitioners' counsel, Mr. Rice, made reference             
          to respondent's argument under section 72(p)(3) in his closing              
          statement after trial.  Although petitioners were not surprised             
          at trial by respondent's position under section 72(p)(3), that              
          position nonetheless constitutes a new matter requiring the                 
          presentation of different evidence which was not raised in the              
          notice and on which respondent has the burden of proof.  See Rule           
          142(a); Seagate Tech., Inc., & Consol. Subs. v. Commissioner, 102           
          T.C. 149, 169 (1994); Achiro v. Commissioner, 77 T.C. at 890.               
               The Tax Reform Act of 1986 (1986 Act), Pub. L. 99-514, sec.            
          1134(c), 100 Stat. 2484, amended the Code to add a new section              
          72(p)(3), effective for loans made, renewed, renegotiated,                  
          modified, or extended after December 31, 1986, 1986 Act, sec.               
          1134(e), 100 Stat. 2484 (1986 Act effective date provisions).               
          Respondent contends that the 1982 plan loan was modified in 1991            
          by the 1991 settlement and that, consequently, the 1982 plan loan           
          falls within the 1986 effective date of section 72(p)(3).  In               
          support of that contention, respondent asserts:                             
                    When the plan was examined in 1991, the settlement                
               agreement called for the terms of the original [1982]                  


          6(...continued)                                                             
                    (II) such loan is secured by amounts attributable                 
                 to elective 401(k) or 403(b) deferrals (as defined in                
                 section 402(g)(3)).                                                  




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