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books, petitioner produce “voluminous” records, petitioner meet
with respondent to discuss the merits of the issues, petitioner
and respondent stipulate facts, petitioner submit a trial
memorandum and posttrial brief, and petitioner spend substantial
time preparing for trial. Petitioner claims that respondent’s
affirmative allegations will prejudice petitioner by requiring it
to expend unnecessary and duplicative attorney’s fees defending
itself from allegations that respondent previously examined and
specifically rejected. Respondent contends that the fact that
petitioner may incur additional attorney’s fees to enable its
counsel to address the issue of Mr. and Mrs. Evans’ employment
status does not merit striking paragraphs 9 and 10 of the second
answer.
After weighing petitioner’s claim of prejudice against
respondent’s claim that the affirmative allegations should be
tried, we conclude that the fact that petitioner will have to be
prepared at trial to counter respondent’s assertion that
petitioner compensated Mr. and Mrs. Evans through the payment of
commissions, personal expenses, and other wages disguised as
shareholder loans is not prejudicial to petitioner and is not a
sufficient basis for granting the motion to strike in this case.
Estate of Jephson v. Commissioner, supra at 1003 (alleged
prejudice of having to adduce evidence at trial to counter the
Commissioner’s assertion is insufficient to grant motion to
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