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With respect to what constitutes a new matter, we have
stated: “A new theory that is presented to sustain a deficiency
is treated as a new matter when it either alters the original
deficiency or requires the presentation of different evidence.”
Shea v. Commissioner, 112 T.C. 183, 191 (1999) (quoting Wayne
Bolt & Nut Co. v. Commissioner, 93 T.C. 500, 507 (1989)).
C. Notice and Pleadings
1. Notice
The notice contains the following explanation of the
principal adjustments:
It is determined that the deductions of $1,300,231.00
in 1994 and $1,528,125.00 in 1995 for officers
compensation are decreased $598,710.00 and $805,469.00,
respectively, because it has not been established that
any amounts greater than $701,521.00 in 1994 and
$722,656.00 in 1995, * * * were for officers
compensation. It has been established that the
unallowed amounts were a distribution of earnings and
profits to stockholder doctors. Accordingly, your
taxable income is increased $598,710.00 in 1994 and
$805,469.00 in 1995.
2. Petition
By the petition, petitioner sets forth the following
disagreement with respondent’s adjustments:
Taxpayer disagrees with all changes and resulting tax
* * * for years 1994 and 1995. Auditor limited
deductible officers’ salaries based on his theory that
reasonable doctors’ salaries were established by the
salary paid to the new, less experienced non-officer
doctor. There is no tax law to validate auditor’s
theory and none was presented to taxpayer during the
audit. * * *
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