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Court did not start trial until 1 week later, to allow petitioner
yet more time to gather additional evidence and to attempt to
settle as many factual issues as possible. When trial resumed
after this 1-week period, petitioner refused to testify.
Moreover, petitioner has not claimed that he could have found or
offered any additional evidence relevant to any of respondent’s
three theories, if given more time.
For all these reasons, it is clear petitioner had fair
warning of the assignment of income, sham, and grantor trust
theories, and would not be prejudiced by our consideration of
them. Accordingly, we hold that respondent may raise (and we may
consider) any of those theories in this proceeding.10
Petitioner’s argument to the contrary has no merit.
B. Burden of Proof
Rule 142(a) provides that “The burden of proof shall be upon
the petitioner * * * except that, in respect of any new matter,
increases in deficiency, and affirmative defenses, pleaded in the
10 Petitioner also asserts that respondent should be
precluded from introducing any evidence relating to the sham,
grantor trust, and assignment of income theories. Because we
have just decided that petitioner had “fair warning” of these
theories, we can think of no reason why respondent should be
prohibited from introducing evidence relevant to those theories.
See Rule 41(b)(2), which states:
If evidence is objected to at the trial on the ground
that it is not within the issues raised by pleadings,
then the Court may receive the evidence * * * and shall
do so freely when justice so requires and the objecting
party fails to satisfy the Court that the admission of
such evidence would prejudice such party in maintaining
such party’s position on the merits.
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