- 54 -
Conclusion
Based on the foregoing, we sustain respondent’s
determination disallowing a $4,856,922 interest deduction claimed
by Indeck on its return for the taxable year ended in 1994 and do
not sustain respondent’s determination recharacterizing, as
interest income, $4,856,922 of $19,866,922 reported by the
Polskys on their 1994 return as long-term capital gain.
Section 6662 Accuracy-Related Penalty
Respondent determined section 6662(a) accuracy-related
penalties against all petitioners for their taxable years ended
21(...continued)
to preclude the Polskys from maintaining that the entire
settlement payment consisted of purchase price for Mr. Polsky’s
shares. We do not consider this issue, as it has not been
properly raised in these cases. Issues raised for the first time
in posttrial briefs are not considered where there is surprise
and prejudice to the opposing party. Seligman v. Commissioner,
84 T.C. 191, 198-199 (1985), affd. 796 F.2d 116 (5th Cir. 1986).
Where as here the issue is raised for the first time in a reply
brief, the prejudice is manifest; neither the Polskys nor
respondent had any opportunity to respond to Indeck’s attempt to
raise equitable estoppel.
Even if this issue had been properly raised, we would reject
Indeck’s argument. Indeck claims equitable estoppel should apply
here because Mr. Polsky’s attorneys represented to Indeck’s
attorneys that the changes sought by Mr. Polsky in the language
of the Settlement Agreement, whereby the three components of the
settlement payment were re-labeled “purchase price”, were “non-
substantive”. Suffice it to say that if Mr. Polsky’s attorneys
in fact characterized the language changes as alleged, their
statements concerned matters of opinion or law, not fact. Cf.
Union Tex. Intl. Corp. v. Commissioner, 110 T.C. 321, 327 (1998)
(party seeking equitable estoppel must show, inter alia, that it
relied on a misrepresentation of fact, as opposed to an opinion
or statement of law).
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