Cir

MEMORANDUM

Walter C. Minnick and A.K. Lienhart (“Taxpayers”) appeal the Tax Court’s decision to grant the Internal Revenue Service (“Commissioner”) permission to file an amended answer on the morning of trial, the Tax Court’s judgment disallowing the deduction of a conservation easement because it was subject to a mortgage that was not subordinated at the time of the donation, and the Tax Court’s imposition of a negligence-related penalty.

Taxpayers appeal the ruling on the motion to file an amended answer, arguing that they suffered prejudice because they lacked notice that subordination would be an issue at trial. Tax Court rules permit parties to amend their pleadings at any time “by leave of Court” and provide that leave “shall be given freely when justice so requires.” Tax Ct. R. 41(a). We review the Tax Court’s decision to allow amendment for abuse of discretion. Estate of Ashman v. Comm’r, 231 F.3d 541 , 542 n. 2 (9th Cir.2000). The record shows that Taxpayers were in fact aware of and prepared to argue the subordination issue at trial. Taxpayers also have not shown that they suffered any prejudice as a result of the Commissioner’s delay in amending the answer. There is…