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prepared by respondent and shown to petitioners on the morning of
trial. Essentially, Exhibit 42-R summarized respondent’s
interpretation of the impact the exhibits attached to the
parties’ joint stipulations of fact had on petitioners’ tax
liability. The Court did not admit Exhibit 42-R into evidence.
Petitioners appear to argue that, because the Court did not admit
Exhibit 42-R into evidence, the Court rejected the arguments
contained therein. The Court’s ruling was limited to the
admissibility of Exhibit 42-R and was not a ruling on the merits
of respondent’s arguments contained therein. The increased
deficiency and addition to tax sought by respondent are not based
on Exhibit 42-R, but instead are based on the exhibits admitted
into evidence as part of the parties’ joint stipulations of fact.
The Court’s ruling on Exhibit 42-R does not affect respondent’s
ability to rely on the exhibits admitted into evidence in seeking
an increased deficiency and addition to tax.
Petitioners’ argument that an amendment to answer would
result in unfair surprise or prejudice is not persuasive. The
amendment to answer would change the issue in this case from
whether petitioners are liable for alternative minimum tax to
whether petitioners received and did not report certain items of
income and whether they are entitled to certain itemized
deductions. As stated above, in seeking an increased deficiency
and addition to tax, respondent relies on exhibits attached to
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