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Petitioner argues that the gross estate should exclude the
value of timber and pecan orchards on the subject property
because the limited partnership, which quitclaimed the undivided
interests to the QTIP trustee, had no beneficial interest in the
timber and pecan orchards to convey. Petitioner argues that when
the limited partnership terminated in 1988 and conveyed the
undivided interests in the subject property to the QTIP trust, it
held at most “bare legal title” to the timber and pecan orchards,
holding all beneficial ownership therein in implied resulting
trusts for the benefit of Walter and Betty, who petitioner
contends were the rightful owners.
Respondent’s primary argument, raised for the first time on
brief, is that the limited partnership was a sham and that the
resulting trust doctrine is therefore inapplicable because the
limited partners had “unclean hands”.
As a general rule, this Court will not consider issues
raised for the first time on brief where surprise and prejudice
are found to exist. See Sundstrand Corp. v. Commissioner, 96
T.C. 226, 346-347 (1991); Seligman v. Commissioner, 84 T.C. 191,
198 (1985), affd. 796 F.2d 116 (5th Cir. 1986); Fox Chevrolet,
Inc. v. Commissioner, 76 T.C. 708, 733-735 (1981). Although the
Court may affirm respondent’s determinations for reasons other
than those cited in the notice of deficiency, “the Court must
determine whether there has been surprise and substantial
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