- 40 - II. Whether Respondent Has Raised a New Issue on Brief Respondent asserts for the first time on brief in conjunction with his incomplete transfer argument that the values of the Marital Fund assets are includable in decedent’s gross estate under section 2033 or section 2041(a)(2). Petitioner contends that respondent’s section 2041(a)(2) argument is a new issue that we should decline to decide. A party may not raise an issue for the first time on brief if the new issue surprises and prejudices the opposing party. Smalley v. Commissioner, 116 T.C. 450, 456 (2001) (citing Seligman v. Commissioner, 84 T.C. 191, 198-199 (1985), affd. 796 F.2d 116 (5th Cir. 1986)). In evaluating whether the opposing party will suffer prejudice, we must consider the degree to which the opposing party is surprised by the new issue and the opposing party’s need for additional evidence to respond to the new issue. Pagel, Inc. v. Commissioner, 91 T.C. 200, 212 (1988), affd. 905 F.2d 1190 (8th Cir. 1980). Furthermore, a party may not rely upon a new theory unless the opposing party has been provided with fair warning of the intention to base an argument upon that theory. Id. at 211-212. “Fair warning” means that the taxpayer’s ability to prepare its case was not prejudiced by the Commissioner’s failure to give notice, in the notice of deficiency or in the pleadings, of his intention to rely on a particular theory. Id.Page: Previous 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 NextLast modified: November 10, 2007