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meeting with petitioner and the accountant. Respondent also
discussed section 263A in the trial memorandum he submitted
before trial. Moreover, petitioners were not prejudiced by
respondent’s section 263A argument. Accordingly, we shall not
bar respondent from relying upon section 263A. Stewart v.
Commissioner, 714 F.2d 977, 985-987 (9th Cir. 1983), affg. T.C.
Memo. 1982-209; see also Achiro v. Commissioner, 77 T.C. 881, 891
(1981).
B. New Matter and Burden of Proof
Section 752211 requires the Commissioner to issue a notice
of deficiency that contains a description of the basis for the
Commissioner’s determination. In this case, respondent issued
two notices of deficiency.
The first notice of deficiency, issued with respect to 1993,
described respondent’s basis for disallowing petitioners’
Schedule C expenses as follows:
It is determined that schedule C expenses are $0.00
rather than $29,254.00 for the taxable year 1993.
Since your restaurant business was not in operation in
the taxable year, all otherwise allowable expenses are
start up expenses which must be amortized over not less
than 60 months starting in the month that the
restaurant is open for business. Further, it has not
been established that any amount represents an ordinary
and necessary business expense or was expended for the
purpose designated.
11Sec. 7522 applies to notices of deficiency issued after
Jan. 1, 1990.
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