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Respondent moved pursuant to Rule 41(b) to increase the
deficiency. See sec. 6214(a). Rule 41(b)(1) provides that
Issues Tried by Consent: When issues not raised by the
pleadings are tried by express or implied consent of the
parties, they shall be treated in all respects as if they
had been raised in the pleadings. The Court, upon motion of
any party at any time, may allow such amendment of the
pleadings as may be necessary to cause them to conform to
the evidence and to raise these issues, but failure to amend
does not affect the result of the trial of these issues.
Whether a motion seeking an amendment should be allowed is within
the sound discretion of the Court. Commissioner v. Estate of
Long, 304 F.2d 136 (9th Cir. 1962). If there is unfair surprise
or prejudice to the opposing party, then the motion to amend
should be denied.
We do not find that granting respondent's motion to amend
would result in unfair surprise to petitioners. In the notice of
deficiency, respondent listed an adjustment for "Gross Receipts
Sch. C." for 1992 and 1993, but respondent did not state a dollar
adjustment. On the schedule B of the notice of deficiency, the
explanation for this adjustment stated that "[t]his issue has
been opened for examination and can still be audited."
Petitioners did not object to respondent's oral motion to
conform the pleadings to the evidence. Further, evidence
necessary to decide the issue of the additional deficiencies was
presented at trial. Petitioners did not object to testimony
regarding this matter and even questioned the witnesses about it.
Petitioners' pretrial memorandum included the following issues
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