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he has not asserted in the alternative that petitioner received
income in 1990 as a result of this loan transaction. On this
record, we are persuaded that petitioner has shown error in
respondent’s determination that she had $12,000 in income in 1989
as a result of the payment from Michael S. in that amount.
Accordingly, the determination is not sustained.
With respect to the second element of respondent’s original
$18,500 determination, namely, the $10,000 fraudulent loan
transaction, petitioner claims that this amount represents the
proceeds from a sale of magnetic tapes from which she realized no
gain. At trial, Mr. S. corroborated petitioner’s claim by
testifying that he paid her $10,000 for magnetic tapes which he
then donated to a school.
On brief, respondent now argues that the $10,000, even if
paid for tapes provided by petitioner, was nevertheless income to
petitioner. Respondent’s propounding of the theory that the
$10,000 from Mr. S. was sales income, and not income from a
fraudulent loan transaction, is, at a minimum, “new matter”
within the meaning of Rule 142(a). Respondent’s adoption of this
theory (without making an allowance for cost of goods sold) is a
new theory which, if we considered it, would prejudice
petitioner. Its tardy assertion would deprive petitioner of an
adequate opportunity to acquire the requisite evidence of her
cost of goods sold. See Sundstrand Corp. v. Commissioner, 96
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