Sippi Nazarian, Petitioner-appellee, v. Commissioner Internal Revenue Service, Respondent-appellant, 990 F.2d 1259 (9th Cir. 1993)

MEMORANDUM^** 

The sole issue presented by this appeal is whether the Tax Court was required as a matter of law to grant the Nazarians'¹  post-trial request to amend their petitions challenging the Commissioner's noticed deficiencies for tax years 1968 and 1969 in order to assert for the first time a claim for income averaging. We vacate and remand for further proceedings.

In Kelley v. C.I.R., 877 F.2d 756 (9th Cir. 1989) we held in part that, because the Commissioner was on notice that the petitioners had elected income averaging for the tax year in question and the Commissioner did not challenge that claim to income averaging until after trial, the Tax Court abused its discretion by denying the petitioners' post-trial request that they be allowed to amend their petition to claim that income averaging be used in calculating their deficiency. Id. at 761-62.

In the instant action, the Nazarians gave no notice to the Commissioner of any intent on their part to elect income averaging for tax years 1968 and 1969 until December 7, 1989, during the post-trial computation phase of proceedings they had initiated with the Tax Court some 18 years earlier. Under these circumstances the rule we announced in Kelley is clearly inapposite and the Tax Court erred by ruling that it lacked the discretion to deny the Nazarians' post-trial request.

VACATED and REMANDED for further proceedings.