Accordingly, a party may not raise an issue for the first time on brief where surprise and prejudice are found to exist. See Seligman v. Commissioner, 84 T.C. 191, 198–199, 1985 WL 15308 (1985), affd. 796 F.2d 116 (5th Cir.1986). The general rule against raising new issues on brief is not absolute, being “founded upon the exercise of judicial discretion in determining whether considerations of surprise and prejudice require that a party be protected from having to face a belated confrontation which precludes or limits that party's opportunity to present pertinent evidence.”
Additionally, the Fifth Circuit has held the "one year" rule to be another important test in distinguishing capital expenses from business expenses. Seligman v. Commissioner, 796 F.2d 116, 119 (5th Cir. 1986). Under the "one year" rule, courts identify capital expenses on the basis of whether the expense creates an asset that will produce benefits lasting beyond the current fiscal year.
Thus, Weeks's summary judgment evidence reflects that the dredging to extend the existing slip was largely "consumed" during the construction of Hull 1829 and would not likely last more than one year.See, e.g., Seligman v. Comm'r, 796 F.2d 116, 119 (5th Cir. 1986) (noting that "one year rule of thumb" is "the prominent, if not predominant characteristic of a capital item" under Tax Code) (internal quotations omitted). The only evidence that FFIC proffered in support of its argument is the affidavit of FFIC claims adjuster Fred Applewhite, who stated conclusionally that "[m]aking a slip at a shipyard bigger by constructing a slip extension . . . is a capital improvement to [Friede Goldman]'s yard and clearly of a nature as to be available for use . . . for all of [Friede Goldman]'s projects."
The Tax Court "consistently has refused to consider issues first raised in the parties' post-trial brief when surprise and prejudice are found to exist." Seligman v. Commissioner, 84 T.C. 191, 198 (1985), affirmed on other grounds, 796 F.2d 116 (5th Cir. 1986). On review, this Court will not overturn the Tax Court's decision not to consider issues raised after trial unless the Tax Court abused its discretion.
To permit petitioners to raise this issue in a post-trial brief, after the trial record closed, would be prejudicial to respondent. See Seligman v. Commissioner, 15 84 T.C. 191, 199 (1985) (finding prejudice where opposing party had no opportunity to present evidence on issue that was not raised in the pleadings), aff'd, 796 F.2d 116 (5th Cir. 1986). In any event, petitioners have failed to prove that they are entitled to loss deductions.
The Commissioner has three distinct opportunities in the life of a case to identify what he wants to put in play: the notice of deficiency, his answer, and any amended answer. Seligman v. Commissioner, 84 T.C. 191, 198 (1985), aff'd, 796 F.2d 116 (5th Cir. 1988). We're not sticklers, but we do require the Commissioner to put taxpayers on "fair notice."
More importantly, the Householders raised the issue of the Gastar stock's marketability for the first time in their reply brief, and we don't let parties raise new issues or theories on brief when doing so would surprise and prejudice the other side. See Smalley v. Commissioner, 116 T.C. 450, 456 (2001); Seligman v.Commissioner, 84 T.C. 191, 198-99 (1985), aff'd, 796 F.2d 116 (5th Cir. 1986). A party is prejudiced if it would need to present additional evidence to respond to the new issue or theory.
Generally a party may not raise an issue for the first time on brief if our consideration of the issue would surprise and prejudice the opposing party. See Smalley v. Commissioner, 116 T.C. 450, 456 (2001); Seligman v. Commissioner, 84 T.C. 191, 198-199 (1985), aff'd, 796 F.2d 116 (5th Cir. 1986). By raising the theft loss issue in their final seriatim brief petitioners have given respondent no opportunity to respond.
A party may generally not raise a new issue if it surprises or prejudices the opposing party. See Seligman v. Commissioner, 84 T.C. 191, 198-99 (1985), aff'd, 796 F.2d 116 (5th Cir. 1986); Robertson v. Commissioner, 55 T.C. 862, 865 (1971); Philbrick v. Commissioner, 27 T.C. 346, 353 (1956). We need not delve much deeper on this, however, because we find that donations to a county's flood-control organization for the preservation and safety of the surrounding dam area are for the use of a political subdivision of a state and exclusively for public purposes.
We do not consider petitioners' arguments raised for the first time in their answering brief. See Seligman v. Commissioner, 84 T.C. 191, 198-199 (1985) (observing that a party may not raise an issue for the first time on brief if the Court's consideration of the issue would surprise and prejudice the opposing party), aff'd, 796 F.2d 116 (5th Cir. 1986). To reflect the foregoing,