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new matter. In the posttrial brief, respondent conceded the
discharge of the other three mortgages did not result in COD
income because petitioners were insolvent on the calculation
dates and argued only for the inclusion of the Household Finance
debt in petitioners’ income. Also, respondent conceded that he
failed to include the Household Finance mortgage in the notice of
deficiency. Respondent did not attempt to amend any of his
pleadings.
Discussion
A. Petitioners’ Argument That Respondent’s Addition of the
Fourth Adjustment Increases the Overall Deficiency
Petitioners question whether respondent met the requirements
of section 6214(a), which provides:
SEC. 6214. DETERMINATIONS BY THE TAX COURT.
(a) Jurisdiction as to Increase of Deficiency,
Additional Amounts, or Additions to the Tax.--* * *
[T]he Tax Court shall have jurisdiction to redetermine
the correct amount of the deficiency even if the amount
so redetermined is greater than the amount of the
deficiency * * * and to determine whether any
additional amount, or any addition to the tax should be
assessed, if claim therefor is asserted by the
Secretary at or before the hearing or a rehearing.
Although respondent argued on brief that the Household Finance
mortgage gave rise to COD income without seeking to amend his
pleadings, see Henningsen v. Commissioner, 243 F.2d 954 (4th Cir.
1957), affg. 26 T.C. 528 (1956); Koufman v. Commissioner, T.C.
Memo. 1977-225; Mazzoni v. Commissioner, T.C. Memo. 1970-37,
supplemented T.C. Memo. 1970-144, affd. 451 F.2d 197 (3d Cir.
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