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the part of the Commissioner, Edens v. Commissioner, T.C. Memo.
1974-309, affd. 549 F.2d 798 (4th Cir. 1976). The Government has
the power to correct mistakes of law because "'Whoever deals with
the government does so with notice that no agent can, by neglect
or acquiescence, commit it to an erroneous interpretation of the
law.'" Graff v. Commissioner, 74 T.C. at 762 (quoting Schafer v.
Helvering, 83 F.2d 317, 320 (D.C. Cir. 1936)). Interpreting
section 104(a)(4) so as to exclude petitioner's pension payments
from income was a mistake of law.
Petitioner contends that the Commissioner should be bound by
the 1990 closing letter. However, a "closing letter" is to be
sharply distinguished from a "closing agreement" under section
7121, entered into by both the taxpayer and the Commissioner
which is binding in accordance with its terms. The "closing
letter" is nothing more than the Commissioner's acceptance of a
return as filed. And the prior practice of the IRS or the
Commissioner's acceptance of a prior year's return does not bar
the Commissioner as to later years. Caldwell v. Commissioner,
202 F.2d 112, 115 (2d Cir. 1953), affg. in part a Memorandum
Opinion of this Court; Rose v. Commissioner, 55 T.C. 28, 31-32
(1970); Tollefsen v. Commissioner, 52 T.C. 671, 681 (1969), affd.
431 F.2d 511 (2d Cir. 1970); Meneguzzo v. Commissioner, 43 T.C.
824, 836 (1965); cf. Dixon v. United States, 381 U.S. 68, 72-75
(1965); Niles Bement Pond Co. v. United States, 281 U.S. 357,
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