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single trade or business activity in which petitioner materially
participated.
Respondent argues that petitioner’s desire to combine his
various activities into a single trade or business activity under
section 1.469-4(c), Income Tax Regs., represents a new issue that
cannot be raised for the first time on brief. Respondent asserts
that to permit petitioner to raise this new issue on brief would
result in unfairness, surprise, and prejudice to respondent.
We have held that issues raised for the first time on brief
will not be considered by the Court when surprise and prejudice
are found to exist. See Seligman v. Commissioner, 84 T.C. 191,
198-199 (1985), affd. 796 F.2d 116 (5th Cir. 1986). Petitioner
had numerous opportunities to raise his new theory, and the
failure to raise this issue when he could have done so waives the
argument. See Aero Rental v. Commissioner, 64 T.C. 331, 338
(1975). Petitioner’s attempt to regroup his activities is
belated and will not be accepted. In any event, his argument is
factually and legally flawed under section 1.469-4(e)(1), Income
Tax Regs., and section 1.469-4(d)(2), Income Tax Regs.
Respondent alternatively argues that petitioner’s proposed
grouping of activities is inconsistent with petitioner’s actual
grouping of activities as reported in 1994, 1995, and 1996.
Section 1.469-4(e)(1), Income Tax Regs., states, in general, that
“once a taxpayer has grouped activities under this section, the
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