89 T.C. 676">*676 OPINION

This case was heard by Special Trial Judge Peter J. Panuthos pursuant to the provisions of 89 T.C. 676">*677 section 7456 of the Code. ¹ The Court agrees with and adopts the Special Trial Judge's opinion, which is set forth below.

1987 U.S. Tax Ct. LEXIS 136">*137 OPINION OF THE SPECIAL TRIAL JUDGE

Panuthos, Special Trial Judge: This case is before the Court on three related motions by petitioners: (1) Motion to reinstate small tax case designation; (2) motion to make an amendment to petition; and (3) motion to change designation of place of trial. The issue for consideration is whether petitioners can obtain small tax case designation under section 7463 and Rule 170 et seq. by conceding a certain monetary portion of respondent's deficiency determination without conceding the underlying issue which originated the notice of deficiency.

The facts are as follows. Respondent issued a statutory notice of deficiency, dated August 14, 1986, determining the following income tax deficiencies and additions to tax:

The adjustments are due to disallowed mining and development expense deductions of $ 30,052 and $ 32,210 for 1981 and 1982, respectively.

1987 U.S. Tax Ct. LEXIS 136">*138 A timely petition was filed on October 27, 1986. ³ In their petition, petitioners requested that the case be conducted under the small tax case procedures of section 7463 and Rule 170 et seq. In this regard, petitioners alleged that they were disputing $ 9,999 of the deficiency for each year. Petitioners designated Fresno, California, as the place of trial.

89 T.C. 676">*678 On December 22, 1986, respondent filed two motions: (1) Motion to remove small tax case designation, and (2) motion to change designation of place of trial. The Court granted both motions without hearing or opinion.

Petitioners then came forward with the three motions now before the Court. In the amended petition, lodged with this Court, petitioners seek to concede a portion of respondent's disallowance of mining and development expenses as follows:

1987 U.S. Tax Ct. LEXIS 136">*139 By conceding a portion of respondent's disallowance, petitioners thereby seek to place in dispute deficiencies and additions to tax as follows:

Since petitioners' motion to amend and motion to change place of trial are dependent upon the outcome of the motion to reinstate small tax case designation, we will focus our attention on that motion. Petitioners argue that since the amounts of $ 9,450 and $ 9,200 are now in dispute for 1981 and 1982, respectively, the case is eligible for the small tax case procedures under section 7463. Respondent argues that when only one issue is in dispute, petitioners cannot concede a monetary portion of the deficiency without conceding the entire issue which created the deficiency. Respondent maintains that the case should not be tried as a small tax case under section 7463 as the issue in dispute, deductibility of mining and development expenses, involves more than $ 10,000 per taxable year.

Section1987 U.S. Tax Ct. LEXIS 136">*140 7463(a) provides in part as follows:

SEC. 7463(a). In General. -- In the case of any petition filed with the Tax Court for a redetermination of a deficiency where neither the amount 89 T.C. 676">*679 of the deficiency placed in dispute, nor the amount of any claimed overpayment, exceeds --

(1) $ 10,000 for any one taxable year, in the case of the taxes imposed by subtitle A,

* * * *

at the option of the taxpayer concurred in by the Tax Court or a division thereof before the hearing of the case, shall be conducted under this section. * * *

[Emphasis added.]

Section 7463(e) provides a further definition:

SEC. 7463(e). Amount of Deficiency in Dispute. -- For purposes of this section, the amount of any deficiency placed in dispute includes additions to the tax, additional amounts, and penalties imposed by chapter 68 [sections 6651 et seq.] to the extent that the procedures described in subchapter B of chapter 63 [sections 6211-6216] apply. ⁴

1987 U.S. Tax Ct. LEXIS 136">*141 Rule 171 defines a small tax case as follows:

The term "small tax case" means a case in which:

(a) Neither the amount of the deficiency * * * placed in dispute (including any additions to tax, additional amounts, and penalties) exceeds --

(1) $ 10,000 for any one taxable year in the case of income taxes, * * *

(b) The petitioner has made a request in accordance with Rule 172 to have the proceedings conducted under Code Section 7463; and

(c) The Court has not entered an order in accordance with * * * Rule 173, discontinuing the proceedings in the case under Code Section 7463.

The issue before us is what constitutes "the amount of the deficiency placed in dispute." Petitioners argue that the amount of deficiency placed in dispute is only the portion of respondent's determination which petitioners have not conceded at the time of trial. Respondent maintains that when one issue is to be litigated, the amount of deficiency placed in dispute is the full amount as determined in respondent's statutory notice.

The Senate Finance Committee report on section 7463 contains an arithmetic example which provides some clarification.

89 T.C. 676">*680 The Court would not be permitted to determine a deficiency1987 U.S. Tax Ct. LEXIS 136">*142 more than $ 1,000 [the then applicable limit] above the undisputed amount in the notice of deficiency. For example, if a deficiency of $ 1,200 were determined by the Internal Revenue Service and the taxpayer put in issue in the Tax Court only $ 300 of that deficiency, then the remaining $ 900 of the deficiency would have been conceded * * *. [In any event], once the taxpayer invoked the small claims procedure and the Tax Court concurred, he could not have the deficiency reduced below $ 200. * * * [S. Rept. 91-552 (1969), 1969-3 C.B. 614, 615 n. 2.]

From the example, it is clear that the amount determined in respondent's statutory notice of deficiency, and the amount petitioner can place in dispute in this Court, need not be the same. The example illustrates a taxpayer who received a statutory notice of deficiency of $ 1,200, an amount in excess of the then applicable small tax case limitation of $ 1,000. Yet, this taxpayer can still have his case heard as a small tax case if the taxpayer concedes an amount sufficient to bring the balance of respondent's determination within the range permitted by statute for small tax case procedures. The Court in 1987 U.S. Tax Ct. LEXIS 136">*143 effect is permitted to narrow the scope of its inquiry and rule on only a portion of the deficiency. In the example, the taxpayer decided to concede $ 900 of the $ 1,200 deficiency, ⁵1987 U.S. Tax Ct. LEXIS 136">*144 thereby placing in dispute $ 300 of respondent's deficiency determination, an amount well below the then applicable $ 1,000 limitation. There is nothing in the Senate Finance Committee report which would indicate that the example was intended to illustrate the concession of an issue in a multi-issue case. The example refers only to monetary amounts of a deficiency. We see no reason why a taxpayer should not be able to concede a portion of the deficiency so as to qualify for small tax case status. ⁶

89 T.C. 676">*681 Petitioners' option to elect the small tax case procedure is not unlimited, even when the jurisdictional maximum for a small tax case has not been exceeded, as the election must be concurred in by the Court. Page v. Commissioner, 86 T.C. 1">86 T.C. 1, 86 T.C. 1">13 (1986). Respondent therefore could attempt to show the Court that the case should not be tried as a small tax case due to the importance of the issue to be determined ( Earl v. Commissioner, 78 T.C. 1014">78 T.C. 1014, 78 T.C. 1014">1020 (1982)); or because the issue is common to other cases before the Court ( 86 T.C. 1">Page v. Commissioner, supra at 13);1987 U.S. Tax Ct. LEXIS 136">*145 or because determination of the issue will establish a principle of law applicable to other cases ( Dressler v. Commissioner, 56 T.C. 210">56 T.C. 210, 56 T.C. 210">212 (1971)). See also H. Rept. 95-1800 (1978), 1978-3 C.B. (Vol. 1) 521, 612. Respondent has not made such argument here.

In the case before us, respondent disallowed petitioners' mining and development expenses and issued a statutory notice of deficiency for $ 12,190.58 and $ 10,395 (exclusive of additions to tax) for 1981 and 1982, respectively. Petitioners have elected small tax case procedures under section 7463 and Rule 170 et seq., and have conceded $ 3,190.58 and $ 2,395 of the deficiency (exclusive of additions to tax) for 1981 and 1982, respectively. Petitioners, therefore, seek to place in dispute $ 9,450 for 1981 and $ 9,200 for 1982, thereby meeting the statutory requirement for small tax case election. Sec. 7463(a)(1). ⁷ As respondent has not shown some other reason why the case should not be tried as a small tax case, we concur with petitioners' election.

1987 U.S. Tax Ct. LEXIS 136">*146 We now turn to petitioners' remaining motions. A party may amend his pleading by leave of the Court and leave shall be given freely when justice so requires. Rule 41(a). ⁸ Respondent has not argued that he would be prejudiced by allowing the amendment nor has he stated any other objection as a basis to deny leave to file the amendment to petition. In the case before us, we believe that justice will best be served by granting petitioners leave to amend their petition. Accordingly, petitioners' motion to make an amendment to petition will be granted.

89 T.C. 676">*682 Finally, the Court makes every effort to conduct a small tax case trial at a location most convenient to the location designated by the taxpayer where suitable facilities are available. Rule 177(a). Petitioners have requested their trial be changed from 1987 U.S. Tax Ct. LEXIS 136">*147 San Francisco, California, to Fresno, California. ⁹ Since we have determined that petitioners are entitled to small tax case status and, further, since such cases are regularly heard in Fresno, California, petitioners' motion to change designation of place of trial will be granted.

An appropriate order will be issued.