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arguments and concluded, with respect to each, that they had
failed to carry their burden of proof. We held that the
corporation which transferred the $1,062,500 to the subject trust
in 1984 had sufficient earnings and profits at the time of the
transfer and that such transfer constituted a dividend
distribution.
On appeal to the Court of Appeals for the First Circuit,
petitioners argued that this Court erroneously concluded that the
controlled foreign corporation had sufficient earnings and
profits in 1984 to support a finding that the $1,062,500 was a
dividend distribution. The Court of Appeals agreed, explaining
that the record lacks adequate support for our conclusion. The
Court of Appeals, however, refused to hold that the $1,062,500 at
issue was properly excluded from petitioners' 1984 tax return.
In remanding this matter to us for further proceedings, the Court
of Appeals explained that the doctrine of quasi-estoppel or duty
of consistency might operate to enable respondent to recoup taxes
on the $1,062,500 transfer. Accordingly, the Court of Appeals
instructed us to entertain the theory of quasi-estoppel.1
1In its opinion, the Court of Appeals for the First Circuit
stated:
The “duty of consistency” seems to apply when the
earlier taxpayer position amounts to a misstatement of
fact, not of law. See, e.g., Herrington v.
Commissioner, 854 F.2d 755, 758 (5th Cir. 1988), cert.
denied, 490 U.S. 1065 (1989) * * *; Beltzer, 495 F.2d
at 213; Mayfair Minerals, Inc. v. Commissioner, 456
(continued...)
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