Robert E. Wadlow and Connie V. Wadlow - Page 10




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          regulations under prior law required a taxpayer who made the                
          election to agree to "extend the statute of limitations for each            
          taxable year in the 5 (or 7) year period to at least 18 months              
          after the due date of his return for the last year in the                   
          period."  S. Rept. 94-938 (Part 1), at 67 (1976), 1976-3 C.B.               
          (Vol. 3) 49, 105.  Such an extension applied to all potential               
          income tax liabilities arising during the period, including                 
          liabilities unrelated to deductions subject to section 183                  
          issues.  See id.                                                            
               In explaining the purpose of section 183(e)(4), the Senate             
          report goes on to say that "the making of this election                     
          automatically extends the statute of limitations, but only with             
          regard to deductions which might be disallowed under section                
          183."  S. Rept. 94-938 (Part 1), supra at 106.  (As we have                 
          previously pointed out, the deductions, and the resulting                   
          overpayments, in this case arose solely in connection with                  
          petitioners' horse boarding and training activities.)                       
               It is thus obvious that by enacting section 183(e)(4),                 
          Congress intended to override section 6501(c)(4) in this narrow             
          area, and since a valid election extends the period of                      
          limitations on assessment by operation of the law, the                      
          requirement of section 6501(c)(4) that there be mutuality by                
          written agreement is inoperative in this area.  A taxpayer could            
          not be heard to object that an assessment resulting from                    





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